<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
KOPPERS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 2491
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
---------------------
436 SEVENTH AVENUE
PITTSBURGH, PENNSYLVANIA 15219
(412) 227-2001
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
---------------------
ROBERT K. WAGNER
CHIEF EXECUTIVE OFFICER KOPPERS INDUSTRIES, INC.
436 SEVENTH AVENUE
PITTSBURGH, PA 15219
(412) 227-2001
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
---------------------
with a copy to:
CLAYTON A. SWEENEY
DICKIE, MCCAMEY & CHILCOTE, P.C.
TWO PPG PLACE, SUITE 400
PITTSBURGH, PA 15222
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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 CLASS OF TO BE PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE(2)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9-7/8% Senior Subordinated
Notes Due 2007................ $175,000,000 100% $175,000,000 $60,375
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
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.
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- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET PURSUANT TO RULE 404(a) AND ITEM 501 OF REGULATION S-K,
SHOWING THE LOCATION IN THE PROSPECTUS OF THE INFORMATION REQUIRED TO BE
INCLUDED THEREIN IN ACCORDANCE WITH PART I OF FORM S-4.
<TABLE>
<CAPTION>
FORM S-4
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
----------------------------------- -------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus......................... Forepart of Registration Statement;
Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................ Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other
Information........................ Forepart of Prospectus; Prospectus
Summary; Risk Factors, Summary
Historical and Pro Forma
Consolidated Financial Information;
Selected Historical Consolidated
Financial Information
4. Terms of the Transaction........... Prospectus Summary; The Exchange
Offer; Description of Notes; Certain
United States Federal Income Tax
Considerations for Non-United States
Holders; Risk Factors
5. Pro Forma Financial Information.... Summary Historical and Pro Forma
Consolidated Financial Information;
Unaudited Pro Forma Condensed
Consolidated Financial Statements;
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
6. Material Contracts with Company
Being Acquired..................... *
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters.......... *
8. Interests of Named Experts and
Counsel............................ *
9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities.................... *
10. Information with Respect to S-3
Registrants........................ *
11. Incorporation of Certain
Information by Reference........... *
12. Information with Respect to S-2 or
S-3 Registrants.................... *
13. Incorporation of Certain
Information by Reference........... *
14. Information with Respect to
Registrants Other Than S-3 or S-2
Registrants........................ Prospectus Summary; Summary
Historical and Pro Forma
Consolidated Financial Information;
Selected Historical Consolidated
Financial Information; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
</TABLE> Business
<PAGE>
<TABLE>
<CAPTION>
FORM S-4
ITEM NUMBER AND CAPTION LOCATION OR HEADING IN THE PROSPECTUS
---------------------------------- -------------------------------------
<C> <S> <C>
15. Information with Respect to S-3
Companies......................... *
16. Information with Respect to S-2 or
S-3 Companies..................... *
17. Information with Respect to
Companies Other Than S-3 or S-2
Companies......................... *
18. Information if Proxies, Consents
or Authorizations are to be
Solicited......................... *
19. Information if Proxies, Consents
or Authorizations are not to be
Solicited or in an Exchange Offer. Management; Principal Stockholders;
Certain Relationships and
</TABLE> Transactions; The Exchange Offer
- ------
* Item is omitted because the answer is negative or the item is inapplicable.
<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 , 1998
PROSPECTUS
KOPPERS INDUSTRIES, INC.
OFFER TO EXCHANGE ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE NOT BEEN SO
REGISTERED.
-------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED
-------------
Koppers Industries, Inc. and all of its subsidiaries (the "Company" or
"Koppers"), a Pennsylvania corporation, hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $175,000,000 aggregate principal amount of its new 9 7/8% Senior
Subordinated Notes due 2007 (the "New Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its outstanding 9 7/8% Senior Subordinated Notes due 2007
(the "Old Notes"), which have not been so registered. The terms of the New
Notes are identical in all material respects to the Old Notes, except for
certain transfer restrictions relating to the Old Notes. The New Notes will
evidence the same indebtedness as the Old Notes and will be issued pursuant to,
and entitled to the benefits of, the same Indenture that governs the Old Notes
(the "Indenture"). As used herein, the term "Notes" means the Old Notes and the
New Notes, treated as a single class.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on , 1998
unless extended (as, so extended, the "Expiration Date"). Tenders of Old Notes
may be withdrawn at any time prior to the Expiration Date. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange pursuant to the Exchange Offer. The Exchange Offer is
subject to certain other customary conditions. See "The Exchange Offer."
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after December 1, 2002. The New Notes will be, and the Old
Notes currently are, unsecured obligations of the Company ranking pari passu
with all other unsecured and subordinated indebtedness of the Company.
The holder of each Old Note accepted for exchange will receive a New Note
having a principal amount equal to that of the surrendered Old Note. 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
December 1, 1997. 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 accepted for exchange will not receive any payment in respect of accrued
interest on such Old Notes. Old Notes not tendered or not accepted for exchange
will continue to accrue interest from and after the date of consummation of the
Exchange Offer.
The Old Notes were issued and sold on December 1, 1997 in a transaction
exempt from the registration requirements of the Securities Act and may not be
offered or sold in the United States unless so registered or pursuant to an
applicable exemption under the Securities Act. The New Notes are being offered
hereunder in order to satisfy certain obligations of the Company contained in
the Registration Rights Agreement (as defined). Based on interpretations by the
staff of the Securities and Exchange Commission (the "Commission") as set forth
in no-action letters issued to third parties, the Company believes that New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than a holder that is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in a distribution of such New Notes. However, the Company has not sought a no-
action letter with respect to the Exchange Offer and there can be no assurance
that the staff of the Commission would make a similar determination with
respect to the Exchange Offer. Each holder of Old Notes, other than a broker-
dealer, must acknowledge that it is not engaged in, and does not intend to
engage or participate in, a distribution of New Notes and has no arrangement or
understanding to participate in a distribution of 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. 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 acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, ending on
the close of business on the 180th day following the Expiration Date (as
defined herein), it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Old Notes, the Company will promptly return
the Old Notes to the holders thereof. See "The Exchange Offer."
SEE "RISK FACTORS" WHICH BEGINS ON PAGE 16 OF THIS PROSPECTUS, FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD
NOTES IN THIS EXCHANGE OFFER.
-------------
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>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New
Notes offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, 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 offered hereby, reference is made to the Registration Statement. Any
statements made in this Prospectus concerning the provisions of certain
documents are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. The
Registration Statement, the exhibits forming a part thereof and such reports
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, Seven World Trade Center, 13th Floor,
New York, New York 10048; and Chicago Regional Office, Citicorp Center, 500
West Madison Street, 14th Floor, Chicago, Illinois 60601. Copies of such
material can be obtained from the Public Reference Section of the Commission,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains an Internet Web Site at
http://www.sec.gov that contains reports and other information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST AS
PROVIDED BELOW. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Exchange Offer contemplated hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for all purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
written or oral request, a copy of any and all of the documents incorporated
in this Prospectus by reference, other than exhibits to such documents not
incorporated by reference therein. Requests for such copies should be directed
to Koppers Industries, Inc., 436 Seventh Avenue, Pittsburgh, Pennsylvania
15219, Attention: Randall D. Collins, Vice President and Corporate Secretary
(telephone (412) 227-2456).
---------------------
2
<PAGE>
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
Certain information included or incorporated by reference in this Prospectus
is forward-looking, including statements contained in the "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," and includes statements
regarding the intent, belief and current expectations of Koppers and its
directors and officers. Such forward-looking information involves important
risks and uncertainties that could materially alter results in the future from
those expressed in any forward-looking statements made by, or on behalf of,
Koppers. These risks and uncertainties include, but are not limited to, the
ability of the Company to maintain existing relationships with long-standing
customers, the ability of the Company to successfully implement productivity
improvements, cost reduction initiatives, facilities expansion and the ability
of the Company to develop, market and sell new products and to continue to
comply with environmental laws, rules and regulations. Other risks and
uncertainties include uncertainties relating to economic conditions,
acquisitions and divestitures, government and regulatory policies,
technological developments and changes in the competitive environment in which
the Company operates. Persons reading this Prospectus are cautioned that such
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, readers should specifically
consider the various factors which could cause actual events or results to
differ materially from those indicated by such forward-looking statements,
including those discussed in "Risk Factors."
ENFORCEABILITY OF JUDGMENTS
Koppers Australia, one of the Subsidiary Guarantors (as defined herein), is
a company limited by shares incorporated under the laws of certain States and
territories of the Commonwealth of Australia. Many of the directors and
executive officers of Koppers Australia (and certain of the experts named in
this Prospectus) are citizens or residents of jurisdictions other than the
United States. All or a substantial portion of the assets of such directors,
executive officers and experts residing outside of the United States and all
of the assets of Koppers Australia are or may be located outside of the United
States, primarily in Australia. As a result, it may not be possible to effect
service of process on such directors and executive officers, such experts or
on Koppers Australia in the United States or to enforce, collect or realize
upon, in the United States courts, judgments against such persons obtained in
United States courts and predicated upon civil liability under United States
securities laws. Koppers has been advised by their special Australian counsel,
Baker & McKenzie, that there is doubt as to the enforceability of civil
liabilities under United States securities laws in actions originating in
federal and state courts in Australia. Baker & McKenzie has also advised
Koppers, however, that subject to certain conditions, exceptions and time
limitations, Australian courts will enforce foreign (including United States)
judgments for liquidated amounts in civil matters, including (although there
is no express authority relating thereto) judgments for such amounts rendered
in civil actions under United States securities laws. Such counsel has further
advised Koppers that an Australian court may allow the enforcement of a
judgment to be effected in United States dollars if such court is satisfied
that this best expresses the relevant loss of a plaintiff, although no opinion
is expressed as to whether or not enforcement of any judgment against Koppers
Australia would be effected in any currency other than Australian dollars and,
if in Australian dollars, the date of determination of the applicable exchange
rate from United States dollars to Australian dollars. Koppers Australia has
appointed CT Corporation System as its agent for service of process in any
suit, action or proceeding with respect to, the Indenture, the Notes and the
Subsidiary Guarantees, brought under federal or state securities laws or
otherwise in any federal or state court located in the Borough of Manhattan,
The City of New York, State of New York, and have submitted to such
jurisdiction. CT Corporation System has agreed to accept such appointment
until one year from the date of issuance of the Notes and has agreed to
continue to serve in such capacity thereafter, provided that Koppers Australia
pays an annual renewal fee.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the financial statements and notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise noted herein, the information
contained in this Prospectus assumes the consummation of the Koppers Australia
Acquisition (as defined herein), which occurred on December 1, 1997 and
pursuant to which Koppers Australia Pty. Limited became a wholly-owned
subsidiary of Koppers Industries, Inc. Except where otherwise indicated,
"Koppers" means Koppers Industries, Inc. and all of its subsidiaries, and the
"Company" refers to Koppers and Koppers Australia (as defined herein). Except
where otherwise indicated, all conversions from Australian dollars to U.S.
dollars are performed using the conversion rate in effect on October 10, 1997,
which was $0.735.
THE COMPANY
GENERAL
The Company is a leading integrated producer of carbon compounds and treated
wood products for use in a variety of markets including the chemical, railroad,
aluminum and steel industries. The "Koppers" name has been associated with the
carbon compounds and wood treating businesses for over 70 years, and the
Company has a leading position in most of its markets. The Company operates 22
facilities in the United States and 14 in the South Pacific (primarily
Australia and New Zealand), and maintains indirect ownership interests in an
additional facility in the United States through its domestic joint venture KSA
(as defined herein) and in five facilities overseas through its joint venture
Tarconord A/S ("Tarconord"). On a pro forma basis the Company recorded net
sales and Adjusted EBITDA (as defined herein) of $717.6 million and $95.8
million, respectively, for the twelve months ended September 30, 1997. For the
same period, the Company's businesses, Carbon Materials & Chemicals, Railroad &
Utility Products, Coke Products and Koppers Australia Pty. Limited and its
subsidiaries ("Koppers Australia"), accounted for 34%, 35%, 14% and 17% of pro
forma net sales, respectively.
Through its Carbon Materials & Chemicals division, Koppers is the largest
coal tar processor in North America. Koppers' Carbon Materials & Chemicals
division processes coal tar into a variety of intermediate products, including
carbon pitch, phthalic anhydride ("PAA") and creosote, which are basic
materials necessary in the production of aluminum, polyester resins and
plasticizers, and the pressure treatment of wood, respectively. Koppers'
Railroad & Utility Products division is the largest supplier of treated wood
products, such as railroad crossties and utility poles, to United States
railroads and the electric and telephone utility industries. Koppers' Coke
Products division converts coal into coke for sale to integrated steel
producers and foundries that use coke in the production of iron and steel.
Products and services provided by Koppers Australia are similar to those
provided by Koppers. Koppers Australia is Australia's largest manufacturer of
carbon pitch, wood preservatives and treated wood products and it markets these
products, as well as carbon black, in Australia, New Zealand and other Pacific
Rim nations. Koppers Australia is the only coal tar distiller in Australia,
providing it with a significant competitive advantage in serving the Australian
aluminum smelting industry.
BUSINESS STRATEGY
The Company's strategy includes: (i) improving productivity; (ii)
implementing additional cost reduction initiatives; (iii) developing, marketing
and selling new products; and (iv) broadening its customer base in new and
existing markets. The Company is currently developing improved pitches for the
aluminum industry, specialty coal tar pitches to be used in electrode carbon
markets and additional downstream applications for naphthalene in the super-
plasticizer and other specialty chemical markets.
4
<PAGE>
COMPETITIVE STRENGTHS
Strong Customer Relationships--The "Koppers" name has been associated with
quality and reliability since the 1920s. The Company's reputation has enabled
it to include among its customers numerous companies preeminent in their
respective markets, including Aluminum Company of America ("Alcoa"), CSX
Transportation, Inc. ("CSX"), LTV Steel Company, Inc. ("LTV") and UCAR Carbon
Company Inc. ("UCAR"). In order to enhance these relationships, the Company has
in place programs to ensure quality and customer satisfaction. In addition, the
Company's facilities are strategically located to service its customers'
requirements.
Broad Product Line--The Company sells a wide variety of products to a diverse
customer base, including steel producers, aluminum smelters, railroads,
utilities, rubber tire producers, wood treaters, producers of polyester resins,
paints, coatings and plasticizers, the roofing industry and pavement sealer
manufacturers. The Company's broad product line and customer base allow it to
reduce its exposure to any one market segment.
Long Term Sales Contracts--Historically, the Company has sought to reduce its
exposure to the cyclicality of its customers' businesses and general economic
conditions by securing commitments for a large portion of its planned
production through annual and multi-year contracts. In each of the last five
years, the Company has been able to secure over 50% of the following year's
sales through such contracts.
Global Presence--The Company, along with its joint venture in Denmark,
Tarconord, serves the North American, European, Asian and Australian markets
with carbon materials and chemical products. The Company works closely with
Tarconord on marketing strategy, raw material sourcing and technology sharing.
The Company and Tarconord have completed several acquisitions and have entered
into marketing agreements enabling the Company to expand its presence into new
and emerging markets, including the United Kingdom, Middle East, South Africa,
People's Republic of China and other Pacific Rim nations.
Diversified Supply Base--The Company believes that its ability to source
high-quality coal tar, wood and coal from multiple suppliers provides it with a
significant competitive advantage in meeting customer requirements in a timely
and economically advantageous manner. In addition, the Company believes its
ability to source coal tar globally is critical to obtaining the quality of
coal tar needed to satisfy its global customers' needs.
Vertical Integration--The Company's ability to utilize, in its manufacturing
processes, products produced in its Carbon Materials & Chemicals and Coke
Products divisions provides the Company with significant cost savings. The
Company also believes it has a significant cost advantage over its competitors
as a result of its ability to use internally generated naphthalene as a primary
feedstock in the production of PAA. All of the Company's domestic competitors
currently use orthoxylene, which is generally a higher-cost feedstock than
naphthalene, in the production of PAA. Creosote, a major by-product of the coal
tar distillation process, is used as a raw material in the treatment of wood by
the Company's Railroad & Utility Products division.
Tax Credits--The Company's coke facility located in Monessen, Pennsylvania
(the "Monessen Facility") qualifies for a tax credit based on its production of
coke as a non-conventional fuel source and the sale thereof to unrelated third
parties. The credit is available through December 31, 2002 and, based on
current production levels at the Monessen Facility, could provide up to a
maximum $10.2 million of tax credits annually, unadjusted for inflation and
assuming full production at the Monessen Facility, until the credit expires.
Use of the tax credits is limited to the availability of taxable income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations." The Company may monetize all or some
portion of these tax credits.
The Company's principal executive offices are located at 436 Seventh Avenue,
Pittsburgh, Pennsylvania 15219-1800, and its telephone number is (412) 227-
2001.
5
<PAGE>
RECENT DEVELOPMENTS
SARATOGA INVESTMENT
On October 15, 1997, KAP Investments, Inc. (a wholly-owned subsidiary of
Koppers Australia) and the Management Investors (as defined herein)
(collectively, the "Offeree Stockholders") acquired from Cornerstone-Spectrum,
Inc. (an affiliate of Beazer East, Inc. and Hanson PLC) its voting and non-
voting shares of common stock of Koppers Industries, Inc. ("Common Stock"). The
Offeree Stockholders utilized $52.5 million of financing from Koppers, Saratoga
Partners III, L.P. ("Saratoga") and Saratoga Koppers Funding, Inc. ("Saratoga
Koppers"). Koppers loaned the Offeree Stockholders $17.0 million, and Saratoga
and Saratoga Koppers loaned the Offeree Stockholders $35.5 million. In exchange
for forgiveness of the loans provided by Koppers, Saratoga and Saratoga
Koppers, the Offeree Stockholders subsequently transferred 1,350,820 non-voting
shares of Common Stock to Koppers and 464,180 non-voting shares of Common Stock
and 2,117,952 voting shares of Common Stock to Saratoga and Saratoga Koppers
(the "Saratoga Investment"). On December 1, 1997, Saratoga exchanged the shares
of Common Stock it acquired in the Saratoga Investment for shares of a new
series of senior convertible preferred stock of Koppers Industries, Inc., which
entitles Saratoga to elect a majority of the Board of Directors of Koppers
Industries, Inc. (the "Board of Directors") and to exercise a majority of the
voting power over all outstanding stock of Koppers Industries, Inc. with
respect to all other matters subject to a stockholder vote. See "Management--
Stockholders' Agreement; New Stockholders' Agreement" and "Certain
Transactions."
RECAPITALIZATION
The Company sold the Old Notes on December 1, 1997 and established with Swiss
Bank Corporation, Stamford Branch and Mellon Bank, N.A. a total of $135.0
million of senior term loan facilities and a $140.0 million senior revolving
credit facility ($40.0 million and $20.0 million of which was reserved for use
in connection with a term loan and a revolving credit facility, respectively,
of Koppers Australia) (the "New Credit Facilities"). The proceeds from the New
Credit Facilities and the sale of the Old Notes have been and are being used to
complete the following transactions: (i) the acquisition of The Broken Hill
Proprietary Company Limited's ("Broken Hill's") 50% interest in Koppers
Australia; (ii) the repayment of all of the 8 1/2% Senior Notes of Koppers
Industries, Inc. due February 1, 2004 (the "8 1/2's") tendered pursuant to a
tender offer and consent solicitation which was commenced October 20, 1997 and
which expired as of 12:00 midnight, New York City time on November 28, 1997
(the "Tender Offer"); (iii) the repayment of the outstanding indebtedness of
approximately $88.1 million under the Company's term loan and revolving credit
facilities (the "Bank Debt Refinancing"); (iv) the redemption of 1,813,200
shares of non-voting Common Stock owned by APT Holdings Corporation, an
affiliate of Mellon Bank, N.A. for $22.9 million; (v) the redemption, at $17.00
per share, of up to 25% of the shares of Common Stock owned by the current
officers of Koppers and Clayton A. Sweeney (a member of the Board of Directors)
and the redemption of up to 100% of the shares of Common Stock owned by any
other Management Investor within sixty (60) days of the consummation of the
offering and the compliance with any applicable securities laws, at the
election of such individuals, in an aggregate amount not exceeding $15.0
million; (vi) the redemption of 436,508 non-voting shares of Common Stock from
Saratoga Koppers; and (vii) the payment of related fees and expenses. The New
Credit Facilities, the sale of the Old Notes and the above transactions are
collectively referred to herein as the "Recapitalization."
6
<PAGE>
THE OLD NOTES OFFERING
Series A Notes................ The Old Notes were sold by the Company on
December 1, 1997 to SBC Warburg Dillon Read
Inc. (the "Initial Purchaser") pursuant to a
Purchase Agreement dated November 20, 1997 (the
"Purchase Agreement"). The Initial Purchaser
subsequently resold the Old Notes to qualified
institutional buyers in reliance upon Rule 144A
under the Securities Act and to institutional
accredited investors in a manner exempt from
the registration requirements of the Securities
Act.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement..................... and the Initial Purchaser entered into a
Registration Rights Agreement dated as of
December 1, 1997 (the "Registration Rights
Agreement"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights, which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Notes Offered................. $175,000,000 aggregate principal amount of
9-7/8% Senior Subordinated Notes due 2007.
The Exchange Offer............ $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of
Old Notes. As of the date hereof, $175,000,000
aggregate principal amount of Old Notes are
outstanding. The Company will issue the New
Notes to tendering holders on or promptly after
the Expiration Date.
Based on no-action letters issued by the staff
of the Commission to third parties, the Company
believes the New Notes issued pursuant to the
Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder
thereof (other than any such holder that is an
"affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such New Notes are acquired in
the ordinary course of such holder's business
and that such holder does not intend to
participate, and has no arrangement or
understanding with any person to participate,
in the distribution of such New Notes.
Each Particpating 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 delivery a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meeting of
the Securities Act. This
7
<PAGE>
Prospectus, as it may be amended or
supplemented from time to time, may be used by
a Participating Broker-Dealer in connection
with resale of New Notes received in exchange
for Old Notes where such Old Notes were
acquired by such Participating Broker-Dealer as
a result of market-making activities or other
trading activities. The Company has agreed
that, for a period of 180 days after the
Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer
for use in connection with any such resale. See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer
with the intention to participate, or for the
purpose of participating, in a distribution of
the New Notes could not rely on the position of
the staff of the Commission communicated in no-
action letters and, in the absence of an
exception therefrom, must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Company.
Expiration Date............... 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the New
Notes and the Old Notes...... Each New Note will bear interest from its
issuance date. Holders of Old Notes that are
accepted for exchange will receive accrued
interest thereon to, but not including, the
issuance date of the New Notes. Such interest
will be paid with the first interest payment on
the New Notes. Interest on the Old Notes
accepted for exchange will cease to accrue upon
issuance of the New Notes.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer--
Conditions."
Procedures for Tendering
Notes......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the Old Notes and any other required
documentation to the Exchange Agent (as
defined) at the address set forth herein. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the New Notes acquired
pursuant to the Exchange Offer are being
obtained in the ordinary course of business of
the person receiving such New Notes,
8
<PAGE>
whether or not such person is the holder, that
neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of
such New Notes and that neither the holder nor
any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act,
of the Company. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
Untendered Old Notes.......... Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate in the Exchange Offer but who do
not tender their Old Notes will not have any
further exchange rights and such Old Notes will
continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the
market for such Old Notes could be adversely
affected.
Consequences of Failure to The Old Notes that are not exchanged pursuant
Exchange...................... to the Exchange Offer will remain restricted
securities. Accordingly, such Old Notes may be
resold only (i) to the Company, (ii) pursuant
to Rule 144A or Rule 144 under the Securities
Act or pursuant to another exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Exchange Offer--Consequences of
Failure to Exchange."
Shelf Registration Statement.. If any holder of the Old Notes (other than any
such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under
the Securities Act) is not eligible under
applicable securities laws to participate in
the Exchange Offer, and such holder has
provided information regarding such holder and
the distribution of such holder's Old Notes to
the Company for use therein, the Company has
agreed to register the Old Notes with a shelf
registration statement (the "Shelf Registration
Statement") and use its best efforts to cause
it to be declared effective by the Commission
as promptly as practical on or after the
consummation of the Exchange Offer. The Company
has agreed to maintain the effectiveness of the
Shelf Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Notes held by any such
holders.
Special Procedures for Any beneficial owner whose Old Notes are
Beneficial Owners............. registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
9
<PAGE>
transfer of registered ownership may take
considerable time. The Company will keep the
Exchange Offer open for not less than 20
business days in order to provide for the
transfer of registered ownership.
Guaranteed Delivery Holders of Old Notes who wish to tender their
Procedures.................... Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender their
Old Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Notes and
Delivery of New Notes........
The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered on or promptly after the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange
Offer.
Exchange Agent................ PNC Bank, National Association (the "Exchange
Agent").
THE NEW NOTES
General....................... The form and terms of the New Notes are the
same as the form and terms of the Old Notes
except that (i) the New Notes will have been
registered under the Securities Act and,
therefore, will not bear legends restricting
their transfer and (ii) the holders of New
Notes will not be entitled to certain rights of
holders of Old Notes under the Registration
Rights Agreement, including the provisions
providing for an increase in the interest rate
on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange
Offer is consummated. See "The Exchange Offer--
Purpose and Effect of the Exchange Offer." The
New Notes will evidence the same debt as the
Old Notes (which they replace) and will be
entitled to the benefits of the Indenture. See
"Description of Notes."
The Notes..................... $175,000,000 principal amount of 9 7/8% Senior
Subordinated Notes due 2007.
Interest Payment Dates........ June 1 and December 1 of each year, commencing
June 1, 1998.
10
<PAGE>
Maturity Date................. December 1, 2007.
Subordination................. The Notes will be general unsecured obligations
of the Company, subordinated in right of
payment to all existing and future Senior Debt
of the Company, including the New Credit
Facilities. In addition, the Notes will be
effectively subordinated to all secured
obligations to the extent of the assets
securing such obligations, including under the
New Credit Facilities. At September 30, 1997 on
a pro forma basis after giving effect to the
Saratoga Investment and the Recapitalization,
Koppers would have had $177.4 million of Senior
Debt outstanding, all of which would have been
secured. The Indenture permits Koppers to incur
additional indebtedness, including Senior Debt,
subject to certain limitations. See
"Description of Notes--Ranking" and
"Description of Notes--Covenants--Limitation on
Debt."
Subsidiary Guarantees......... The Notes are unconditionally guaranteed, on a
senior subordinated basis, by all of the
Company's existing wholly-owned direct
subsidiaries, Koppers Australia, and
substantially all of the significant wholly-
owned subsidiaries of Koppers Australia and
each subsidiary that in the future guarantees
the New Credit Facilities (collectively, the
"Subsidiary Guarantors"). The Subsidiary
Guarantees are joint and several, general
unsecured obligations of the Subsidiary
Guarantors. The Subsidiary Guarantors
guaranteed all obligations of the Company under
the New Credit Facilities, and each Subsidiary
Guarantor granted a security interest in
substantially all its assets to secure the
obligations under the New Credit Facilities.
The obligations of each Subsidiary Guarantor
under its Subsidiary Guarantee are subordinated
in right of payment to all existing and future
Guarantor Senior Debt (as defined herein) to
substantially the same extent as the Notes are
subordinated to all existing and future Senior
Debt of the Company.
Optional Redemption........... The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or
after December 1, 2002, at the redemption
prices set forth herein, plus accrued and
unpaid interest to the redemption date. The
Company may also redeem up to 35% of the
aggregate principal amount of Notes at its
option at any time prior to December 1, 2000,
at a redemption price equal to 109.875% of the
principal amount thereof, plus accrued and
unpaid interest to the redemption date, with
the net proceeds of one or more issuances of
Common Stock (other than Redeemable Stock (as
defined herein)); provided, however, that at
least $100 million in aggregate principal
amount of the Notes remains outstanding
following each such redemption. See
"Description of Notes--Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase all or any part of each holder's
Notes at a repurchase price equal to 101% of
the
11
<PAGE>
principal amount thereof, plus accrued and
unpaid interest to the repurchase date. There
can be no assurance that the Company will have
the financial resources necessary to purchase
the Notes upon a Change of Control or that such
repurchase will be permitted under the New
Credit Facilities. See "Description of Notes--
Covenants--Change of Control."
Certain Covenants............. The Indenture will contain certain covenants
that, among other things, will limit the
ability of the Company and its subsidiaries to
incur additional indebtedness, pay dividends or
make other distributions, make investments,
dispose of assets, issue preferred stock of
subsidiaries, create certain liens securing
indebtedness, enter into sale and leaseback
transactions, enter into certain transactions
with affiliates, or enter into certain mergers
or consolidations or sell all or substantially
all of the Company's assets. See "Description
of Notes--Covenants."
RISK FACTORS
For a discussion of certain factors that should be considered in evaluating
an investment in the Notes, see "Risk Factors."
12
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following summary financial information for the three years ended
December 31, 1996, is derived from the Consolidated Financial Statements of
Koppers, which have been audited by Ernst & Young LLP, independent auditors,
and are included elsewhere herein. The following summary financial information
of Koppers for the nine-month period ended September 30, 1997 and 1996, which
is unaudited, is derived from the unaudited financial statements included
elsewhere herein. The pro forma summary financial information as of and for the
year ended December 31, 1996, which is unaudited, gives effect to the Saratoga
Investment and the Recapitalization as if they had been consummated on January
1, 1996. The pro forma summary financial information as of and for the nine-
month and the twelve-month periods ended September 30, 1997, which is
unaudited, gives effect to the Saratoga Investment and the Recapitalization as
if they had been consummated on January 1, 1997 and October 1, 1996,
respectively. Neither the summary historical financial data nor the summary pro
forma financial data are necessarily indicative of either the future results of
operations or the results of operations that would have occurred if those
events had been consummated on the indicated dates. The following summary
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
unaudited Pro Forma Condensed Consolidated Financial Statements and the
historical Consolidated Financial Statements, related notes, and other
financial information included herein.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED NINE MONTHS TWELVE MONTHS
(DOLLARS IN THOUSANDS, YEARS ENDED DECEMBER 31, SEPTEMBER 30, ENDED ENDED
EXCEPT OPERATING STATISTICS) ------------------------------------- ------------------ SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996 1996 1997 1997 1997
-------- -------- -------- --------- -------- -------- ------------- -------------
PRO FORMA (UNAUDITED) PRO FORMA PRO FORMA
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $476,448 $525,730 $588,544 $722,140 $443,510 $452,260 $538,298 $717,584
Gross profit............ 52,235 67,452 70,689 104,905 52,721 53,527 71,478 98,624
Operating profit (1).... 25,709 39,848 27,631 48,509 21,271 31,968 43,240 55,634
Other income (expense)
(2)..................... 5,845 9,615 (3,036) (9,576) (3,696) 3,282 (472) (2,001)
Interest expense........ 13,620 15,060 16,636 31,500 12,462 12,387 23,625 31,500
Income before taxes and
minority interest...... 17,934 34,403 7,959 7,433 5,113 22,863 19,143 22,133
Minority interest....... 1,354 992 1,398
Net income (3).......... 11,102 24,440 14,098 5,513 5,527 22,159 13,370 19,465
BALANCE SHEET DATA
(END OF PERIOD):
Working capital......... $ 79,078 $ 80,095 $ 77,688 $ 76,086 $ 80,345 $131,125 $131,125
Total assets............ 294,193 348,955 411,180 412,188 395,923 506,588 506,588
Total debt.............. 159,000 174,000 209,884 213,420 189,772 352,392 352,392
Common Stock subject to
redemption (4)......... 15,450 23,715 23,957 24,800 22,940 10,587 10,587
Preferred and common
equity................. 36,490 54,255 54,106 46,327 68,540 (2,821) (2,821)
-------- -------- -------- -------- -------- -------- --------
Total preferred and
common equity and
Common Stock subject to
redemption............. 51,940 77,970 78,063 71,127 91,480 7,766 7,766
SELECTED FINANCIAL DATA:
EBITDA (5).............. $ 44,342 $ 60,699 $ 47,139 $ 75,639 $ 33,795 $ 53,423 $ 68,518 $ 89,437
Adjusted EBITDA (6)..... 46,800 60,699 71,136 99,636 52,839 54,837 69,932 95,804
Depreciation and
amortization (7)....... 16,680 17,532 21,793 32,184 16,298 17,908 25,460 33,487
Capital expenditures.... 16,326 15,193 21,717 28,142 16,134 12,999 18,113 25,523
Acquisitions and related
capital expenditures
(8).................... -- 34,948 39,517 104,517 39,331 -- 65,000 65,186
SELECTED RATIOS:
EBITDA/interest expense. 3.26x 4.03x 2.83x 2.40x 2.71x 4.31x 2.90x 2.84x
Adjusted EBITDA/interest
expense................ 3.44x 4.03x 4.28x 3.16x 4.24x 4.43x 2.96x 3.04x
Total debt/EBITDA....... 3.59x 2.87x 4.45x 3.94x
Total debt/Adjusted 3.40x 2.87x 2.95x 3.68x
EBITDA..................
Ratio of earnings to
fixed charges (9)...... 2.00x 2.76x 1.36x 1.20x 1.31x 2.37x 1.68x 1.59x
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
----------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING STATISTICS:
Carbon pitch sales volumes (tons)..... 241,186 253,928 364,771 267,983 283,567
Average PAA price per lb.............. $ .2952 $ .4508 $ .3069 $ .3072 $ .3285
Average orthoxylene price per lb...... $ .1929 $ .2880 $ .1646 $ .1622 $ .1892
Crosstie volumes (pieces 000s)........ 5,902 7,096 7,357 5,566 5,830
</TABLE>
- --------
(1) Operating profit for 1994 reflects $2.5 million of severance charges.
Operating profit for the nine months ended September 30, 1996 reflects $7.4
million of plant closing charges and $2.6 million of severance charges.
Operating profit for the year ended December 31, 1996 actual and pro forma
and for the twelve months ended September 30, 1997 pro forma includes an
additional $5.4 million of capacity rationalization charges. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(2) Other expense for the year ended December 31, 1996 includes a $10.1 million
charge related to settlement of a legal judgment rendered against Koppers
in connection with litigation brought against Koppers by Owens-Corning
Fiberglas Corporation (the "OCF Settlement") and a $2.5 million legal
settlement to CSX. Other expense for the nine months ended September 30,
1996 does not include the CSX settlement. Other income includes $5.3
million, $9.2 million, $9.6 million, $6.4 million and $4.7 million of
equity earnings in affiliates for the years ended December 31, 1994, 1995
and 1996, and for the nine months ended September 30, 1996 and 1997,
respectively. Other income includes $3.0 million, $2.2 million and $3.2
million of equity earnings in affiliates for the year ended December 31,
1996 pro forma, the nine months ended September 30, 1997 pro forma and the
twelve month period ended September 30, 1997 pro forma, respectively.
(3) Net income for 1994 includes loss on early extinguishment of debt of $1.8
million.
(4) The Stockholders' Agreement (as defined herein) requires Koppers, subject
to limitations under the terms of covenants contained in its debt
instruments, to redeem stock held by Management Investors upon termination
of their employment with Koppers.
(5) "EBITDA" is as defined in the Indenture. See "Description of Notes." EBITDA
is presented not as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information
related to the debt servicing ability of the Company. The Company's
definition of EBITDA may not be comparable to other companies' definitions
of EBITDA. Amortization of deferred financing fees is included in the
Company's financial statements in depreciation and amortization and
amounted to $0.8 million, $0.9 million, $0.7 million, $0.5 million and $0.5
million for fiscal years 1994, 1995 and 1996 and for the nine month periods
ended September 30, 1996 and 1997, respectively. Amortization of deferred
financing fees for the year ended December 31, 1996 pro forma, the nine
months ended September 30, 1997 pro forma and the twelve month period ended
September 30, 1997 pro forma amounted to $1.5 million, $1.1 million and
$1.5 million, respectively.
(6) "Adjusted EBITDA" is defined as EBITDA plus the cash portion of non-
recurring charges. The non-recurring charges include the following: 1994--
$2.5 million of severance charges; 1996--$15.5 million of restructuring
charges and $12.6 million of litigation charges for the year ended December
31, actual and pro forma; $10.1 million of restructuring charges and $10.1
million of litigation charges for the nine months ended September 30; and
1997--$1.4 million write-off of costs related to an Initial Public Offering
(the "IPO") for the nine months ended September 30, actual and pro forma;
$5.4 million of restructuring charges, $2.5 million of litigation charges
and $1.4 million write-off of IPO costs for the twelve months ended
September 30 pro forma. Adjusted EBITDA is presented not as an alternative
measure of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles), but rather to
provide additional information related to the debt servicing ability of the
Company.
14
<PAGE>
(7) The 1994 results reflect a $1.4 million reduction in depreciation expense
for change in estimate of useful lives of certain assets effective July 1,
1994. See Note 1 of the Notes to Consolidated Financial Statements of the
Company.
(8) Acquisitions and related capital expenditures for 1995 include
approximately $35 million related to the acquisition and modernization of
the Monessen Facility and the acquisition of a wood crosstie treating
facility in Somerville, Texas; acquisitions and related capital
expenditures for fiscal year 1996 and the nine month period ended September
30, 1996 each include approximately $40 million related to the acquisition
of a coal tar distillation facility in Clairton, Pennsylvania. Acquisitions
and related capital expenditures for all pro forma periods include $65
million related to the Koppers Australia Acquisition.
(9) For purposes of calculating the ratio of earnings to fixed charges (i)
earnings consist of income before taxes, extraordinary items and cumulative
effects of accounting changes plus fixed charges and (ii) fixed charges
consist of interest expense incurred excluding amortization of deferred
financing costs, and 41% of rental payments under operating leases (an
amount estimated by management to be the interest portion of such rentals).
15
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should consider carefully the following risk factors in evaluating
whether to tender their Old Notes for New Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged and has significant debt service
requirements. At September 30, 1997, on a pro forma basis after giving effect
to the Saratoga Investment and the Recapitalization, the Company would have
had $352.4 million of long-term debt outstanding, $177.4 million of which
would have been secured. It is anticipated that under the New Credit
Facilities, the Company will have scheduled principal payments aggregating
$11.0 million, $16.0 million and $21.0 million for the years 1998, 1999 and
2000, respectively, increasing to a maximum of $45.0 million in 2003. For the
nine months ended September 30, 1997, on a pro forma basis, the Company's
earnings to fixed charges coverage ratio would have been 1.68 to 1.
The degree to which the Company is leveraged will have important
consequences to holders of the Notes, including: (i) the ability of the
Company to obtain additional financing, whether for working capital, capital
expenditures, or other purposes, may be impaired; (ii) a substantial portion
of the Company's cash flow from operations will be required for debt service,
thereby reducing funds available to the Company for its operations; (iii) the
Company will be substantially more leveraged than certain of its competitors,
which might place the Company at a competitive disadvantage; (iv) the
Company's flexibility in planning for or reacting to changes in market
conditions may be limited; (v) the Company may be more vulnerable upon a
downturn in its business; and (vi) to the extent that the Company incurs any
indebtedness at variable rates, including under the New Credit Facilities, the
Company will be vulnerable to increases in interest rates.
Based on current operations (assuming the Company does not incur any
material liabilities not presently known to the Company (including any such
environmental liabilities)), the Company expects that it will be able to meet
the debt service requirements on its indebtedness, meet its working capital
needs and fund its capital expenditures and other operating expenses out of
cash flow from operations and available borrowings under the New Credit
Facilities. However, there can be no assurance that the Company's business
will generate cash flow at levels sufficient to meet these requirements. If
the Company is unable to generate sufficient cash flow from operations to
service its debt obligations and to meet other cash requirements, it may be
required to sell assets, reduce capital expenditures, refinance all or a
portion of its existing debt (including the Notes) or obtain additional
financing. There can be no assurance that any such asset sales or refinancing
would be possible or that any additional financing would be available, if at
all, on terms acceptable to the Company. The Company's ability to meet its
debt service obligations will be dependent upon its future performance which,
in turn, will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the Company's control.
SUBORDINATION OF NOTES AND SUBSIDIARY GUARANTEES
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Notes is subordinated to the prior payment in
full of all existing and future Senior Debt of the Company, including all
amounts owing or guaranteed under the New Credit Facilities. The Subsidiary
Guarantees are similarly subordinated to Guarantor Senior Debt. Consequently,
in the event of a bankruptcy, liquidation, dissolution, reorganization or
similar proceeding with respect to the Company or a Subsidiary Guarantor,
assets of the Company or such Subsidiary Guarantor will be available to pay
obligations on the Notes or Subsidiary Guarantees only after all Senior Debt
of the Company or Guarantor Senior Debt, as applicable, has been paid in full,
and there can be no assurance that there will be sufficient assets to pay
amounts due on any or all of the Notes. In addition, neither the Company nor
any Subsidiary Guarantor may pay principal, premium, interest or other amounts
on account of the Notes or any Subsidiary Guarantee in the event of a payment
default in respect
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of Designated Senior Debt (as defined herein) unless such amount has been paid
in full or the default has been cured or waived. In addition, in respect of
certain Designated Senior Debt and unless certain other conditions are
satisfied, neither the Company nor any Subsidiary Guarantor may make any
payment on account of the Notes for a designated period of time. See
"Description of Notes--Subordination." At September 30, 1997, after giving pro
forma effect to the Saratoga Investment and the Recapitalization, the Company
would have had $177.4 million of Senior Debt and/or Guarantor Senior Debt
outstanding. See "Description of Notes--Ranking."
FRAUDULENT CONVEYANCE STATUTES
The incurrence of indebtedness (such as the Notes), and the use of the
proceeds thereof in connection with the Koppers Australia Acquisition, the APT
Holdings Corporation redemption, the Saratoga Koppers redemption and the
Management Redemption Offer (as defined herein), is subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
the Company. Under these statutes, if a court were to find that obligations
(such as the Notes) were incurred with the intent of hindering, delaying or
defrauding present or future creditors, that the Company received less than a
reasonable equivalent value of fair consideration for those obligations or
that the Company contemplated insolvency with a design to prefer one or more
creditors to the exclusion, in whole or in part, of other creditors and, at
the time of incurrence of the obligations, the obligor (i) was insolvent or
rendered insolvent by reason thereof, (ii) was engaged or was about to engage
in a business or transaction for which its remaining unencumbered assets
constituted unreasonable small capital or (iii) intended to or believed that
it would incur debts beyond its ability to pay such debts as they matured or
became due, such court could void the Company's obligations under the Notes,
subordinate the Notes to other indebtedness of the Company or take other
action detrimental to the holders of the Notes. Some courts have held that an
obligor's purchase of its own capital stock does not constitute reasonably
equivalent value or fair consideration for indebtedness incurred to finance
that purchase.
To the extent that the Subsidiary Guarantee of any Subsidiary Guarantor is
avoided as a fraudulent conveyance or found unenforceable for any other
reason, holders of the Notes would cease to have any claim in respect of such
Subsidiary Guarantor. However, under U.S. law under certain circumstances,
claims may be subordinated and, in such event, the claims of the holders of
the Notes against such Subsidiary Guarantor would be subject to the prior
payment of all liabilities and preferred stock claims, if any, of such
Subsidiary Guarantor. There can be no assurance that, after providing for all
prior claims and preferred stock interests, if any, there would be sufficient
assets to satisfy the claims of the holders of the Notes relating to any
voided portion of the Subsidiary Guarantee of such Subsidiary Guarantor.
In addition, various statutes have been enacted and various principles have
been developed in Australia under common law and equitable doctrines for the
benefit of creditors. Under Australian law, a guarantee given by a company may
be set aside on a number of grounds. For example, a guarantee may be
unenforceable against a guarantor if (i) the rules permitting a liquidator to
successfully claim and void the guarantee are applicable (as described below)
or (ii) the guarantor itself did not receive a sufficient commercial benefit
in order to justify such guarantor providing the guarantee. Issues as to
unenforceability of a guarantee by reason of insufficient corporate benefit
may arise where a company in a corporate group, such as Koppers Australia,
provides a guarantee in relation to the obligations of another member of the
corporate group. The question of what constitutes a sufficient benefit is a
fact-based qualitative inquiry, to be made for each guarantor individually as
a separate legal entity, which weighs several considerations, including
circumstances pertaining to (i) the nature of the relationship between the
group companies, (ii) the nature and present value of the benefit and the
burden of the obligations that will flow to each party to the transaction and
(iii) the knowledge of the directors of each guarantor as to the decisions
made by such guarantor. Each of the Subsidiary Guarantors will represent and
warrant in the Indenture, for the benefit of the holders of the Notes, that
its obligations have been undertaken in good faith and for the purpose of or
in connection with the conduct of its business and for its commercial benefit,
which is commensurate with the obligations undertaken by it. However, such
representations and warranties may not be determinative of the matter if it
were to be considered by a court. Under Australian law, it is possible that
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in a proceeding to enforce the Subsidiary Guarantees, each Subsidiary
Guarantee will be analyzed differently and produce different results.
Under Australian law, if an order to wind up were to be made against Koppers
Australia and a liquidator appointed for Koppers Australia, such liquidator
would have the power to investigate the validity of past transactions and may
seek various court orders, including orders to avoid certain transactions
entered into prior to the winding-up of Koppers Australia and for the
repayment of money. Under Australian Corporations Law, a transaction may be
voided at the claim of a liquidator if it was entered into during various time
periods prior to the filing of an application for a winding-up of a company,
ranging from six months to ten years, depending upon the character of the
transaction. There can be no assurance that one or more of the Subsidiary
Guarantees will not be avoided and that holders of the Notes will not be left
with a claim solely against Koppers Industries, Inc.
The measure of insolvency for purposes of a fraudulent conveyance claim will
vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the
sum of its debts at that time is greater than the fair value of its assets or
if the fair salable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become absolute and mature.
On the basis of its historical financial information, its recent operating
history as discussed in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other factors, the Company believes
that, after giving effect to the Saratoga Investment and the Recapitalization,
the Company will be (i) neither insolvent nor rendered insolvent by the
incurrence of indebtedness in connection with the Saratoga Investment and the
Recapitalization, (ii) in possession of sufficient capital to run its business
effectively and (iii) incurring debts within its ability to pay as the same
mature or become due. There can be no assurance, however, as to whether a
court would concur with such beliefs.
RESTRICTIONS IMPOSED BY CERTAIN COVENANTS
The New Credit Facilities and the Indenture contain a number of significant
covenants that, among other things, restrict the ability of the Company to
dispose of assets, incur additional indebtedness, incur liens on property or
assets, repay other indebtedness, pay dividends, enter into certain
investments or transactions, repurchase or redeem capital stock, engage in
mergers or consolidations, or engage in certain transactions with subsidiaries
and affiliates and otherwise restrict corporate activities. There can be no
assurance that such restrictions will not adversely affect the Company's
ability to finance its future operations or capital needs or engage in other
business activities that may be in the interest of the Company. In addition,
the New Credit Facilities also require the Company to maintain compliance with
certain financial ratios. The ability of the Company to comply with such
ratios may be affected by events beyond the Company's control. A breach of any
of these covenants or the inability of the Company to comply with the required
financial ratios could result in a default under the New Credit Facilities. If
any such default occurs, the lenders under the New Credit Facilities could
elect to declare all borrowings outstanding under the New Credit Facilities,
together with accrued interest and other fees, to be due and payable. If the
Company were unable to repay any such borrowings when due, the lenders under
the New Credit Facilities could proceed against their collateral. If the
indebtedness under the New Credit Facilities or the Notes were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay such indebtedness in full. Any such default may have a
material adverse effect on the Company's financial condition and results of
operations. See "Description of New Credit Facilities" and "Description of
Notes."
CONTROL OF THE COMPANY
Under the Stockholders' Agreement, Saratoga has the right to elect a
majority of the Board of Directors. Consequently, Saratoga will have the
ability to control the election of the Board of Directors and the outcome of
other issues submitted to the stockholders for approval. See "Principal
Stockholders."
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CYCLICALITY OF MARKETS
The Company's products are sold primarily in mature markets which
historically have been cyclical. The principal consumers of the Company's
pitch, the most significant product of its Carbon Materials & Chemicals
division, are United States primary aluminum smelters. Although the aluminum
industry has experienced growth on a long-term basis, it generally is cyclical
in nature and experiences fluctuations in production levels. There may be
cyclical periods of weak demand which could result in decreased United States'
primary aluminum production. Sales of the Company's products have historically
been affected adversely by weakness in the global demand for aluminum.
Principal products utilizing the Company's PAA include flexible vinyl used
mainly in the automobile industry. Therefore, fluctuations in domestic and
international automobile production affect the demand for PAA.
The principal customers for the Company's coke are United States integrated
steel producers, whose consumption of coke has been cyclical in the past and
may be so in the future. The prices at which the Company will be able to sell
its coke in the future will be greatly affected by the demand for coke from
the iron and steel industries and the supply of coke from the United States
integrated steel producers' own coke production and from foreign sources.
DEPENDENCE ON MAJOR CUSTOMERS
For the year ended December 31, 1996, the Company's top five customers
accounted for approximately 25% of the Company's net sales. During this
period, the Company's two largest customers, CSX and LTV, accounted for
approximately 5% and 9% of the Company's total net sales, respectively. The
permanent loss of, or a significant decrease in the level of purchases by, one
or more of the Company's major customers could have a material adverse effect
on the Company's results of operations.
PRICE AND AVAILABILITY OF RAW MATERIALS
An inability of the Company to source quality raw materials in a timely
fashion and pass through price increases to its customers could have a
material adverse impact on the Company's financial condition and results of
operations. The primary raw material used by the Carbon Materials & Chemicals
division is coal tar, a by-product of coke production. Following the Clean Air
Act Amendments of 1990 (the "Clean Air Act Amendments") and other
environmental regulations, there have been significant reductions in United
States coking capacity. Due to potential additional reductions in United
States and Australian coking capacity, future coal tar availability is a
concern for the Company. A shortage in the supply of domestic coal tar could
require the Company to increase imports of coal tar and carbon pitch, as well
as the use of petroleum substitutes to meet future carbon pitch demand; such
actions could have a material adverse effect on the Company's financial
condition and results of operations.
The availability and cost of softwood and hardwood lumber are critical
elements in the Company's production of pole products and railroad crossties,
respectively. The supply of trees of acceptable size for the production of
utility poles has decreased in recent years in relation to the demand, and the
Company accordingly has been required to pay a higher price for these
materials. Historically, the supply and cost of hardwood for railroad
crossties have also been subject to availability and price pressures. There
can be no assurance that the Company will be able to source wood raw materials
at economical prices in the future.
In the Coke Products division, metallurgical coal is the primary raw
material used in the production of coke. An increase in the price of
metallurgical coal, or a prolonged interruption in supply, could have a
material adverse effect on the Company.
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COMPETITION
The markets that the Company serves are highly competitive. Selling price is
the most significant competitive factor in the markets for the Company's
principal products. In addition, some of the purchasers of the Company's coke
are capable of supplying a portion of their needs from their own coke
production as well as from suppliers outside the United States who are able to
import coke into the United States and sell it at prices competitive with
those of United States suppliers. There can be no assurances that competitive
pressures on the price of the Company's products will not materially and
adversely affect its business, results of operations, cash flow and financial
condition. Certain competitors of the Company have greater financial resources
and larger capitalization than the Company and, as a result, may be better
able to withstand volatile market conditions and price competition.
ENVIRONMENTAL MATTERS
Like companies involved in similar environmentally sensitive businesses, the
Company's operations and properties are subject to extensive federal, state,
local and foreign environmental laws and regulations, including those
concerning, among other things, the treatment, storage and disposal of wastes,
the investigation and remediation of contaminated soil and groundwater, the
discharge of effluents into waterways, the emissions of substances into the
air or otherwise relating to environmental protection and various health and
safety matters (collectively, "Environmental Laws"). The Clean Air Act and
Clean Water Act, each as amended, impose stringent standards on air emissions
and water discharges, respectively. Under the Resource Conservation and
Recovery Act, as amended ("RCRA"), a facility that treats, stores or disposes
of hazardous waste on-site may be liable for corrective action costs, and a
facility that holds a RCRA permit may have to incur costs relating to the
closure of certain "hazardous" or "solid" waste management units. Under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA") and similar state laws, an owner or operator of property
at which releases of hazardous substances have occurred may be liable for
investigation and remediation of any resulting contamination and related
natural resource damages. In addition, under CERCLA, the generator of
hazardous substances may be strictly, and jointly and severally liable for any
required investigation or remediation at third-party disposal sites and
related natural resource damages. The Environmental Laws are subject to
frequent amendment. The sanction for failure to comply with such Environmental
Laws can include significant civil penalties, criminal penalties, injunctive
relief and denial or loss of, or imposition of significant restrictions on,
environmental permits. In addition, the Company could be subject to suit by
third parties in connection with violations of or liability under
Environmental Laws.
In March 1996, Jefferson County, Alabama ("Jefferson County") issued a
notice of violation in connection with various alleged violations of air
pollution control regulations regarding emissions from coke oven batteries at
Koppers' coke facility located in Woodward, Alabama ("the Woodward Coke
Facility"). In February 1997, the United States Environmental Protection
Agency ("US-EPA") issued a notice of violation covering the same issues.
Thereafter, Koppers discovered that certain benzene abatement equipment at
this Facility had not been operational for several months. Koppers and
Jefferson County have negotiated a settlement agreement which includes both
the original Jefferson County notice of violation and the self-reported
benzene abatement violation, and requires Koppers to pay a civil penalty in
the amount of $450,000, which sum has been paid. There can be no assurance
that the settlement with Jefferson County will deter the US-EPA from pursuing
its notice of violation. Following a preliminary investigation of the Woodward
Coke Facility, Koppers also discovered that certain environmental reports and
records required under the Clean Water Act contained incomplete and inaccurate
information and that certain environmental reports and certifications were not
filed when required. Corrected reports have been submitted to Jefferson
County, the State of Alabama and the US-EPA. In June 1997, during a routine
environmental compliance audit of the Logansport Wood Treating Facility, it
was discovered that certain records and reports required under the Clean Water
Act contained incomplete and inaccurate information. Corrected reports have
been submitted to the local municipality, the State of Louisiana and the US-
EPA. Although no notice of violation has been issued in conjunction with this
issue, it is likely that such a notice will be issued and substantial
penalties sought by the regulatory authorities. On April 25, 1997, Koppers was
served with notices of violation by the Pennsylvania Department of
Environmental Protection ("Pa-DEP")
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which alleged that Koppers was in violation of a Pa-DEP plan approval for the
Monessen Facility regarding nitrogen oxide emissions and failed to conduct
timely emission testing on Monessen Facility boilers. Koppers could be subject
to significant liability in connection with each of these matters, including
injunctive relief, substantial civil and criminal penalties and the risk of
third-party lawsuits. Resolution of these and other pending compliance matters
could have a negative effect on the business, financial condition, cash flow
and results of operations of the Company.
For each of the last three fiscal years, the Company's average capital
expenditures and operating expenses for environmental matters, including
depreciation, amounted to approximately $7.0 million and $16.0 million,
respectively. The Company believes that environmental operating costs will not
change materially from those incurred during the past three years. The Company
currently estimates that capital expenditures in connection with matters
relating to environmental control will be approximately $3.8 million and $6.9
million for 1997 and 1998, respectively. Because Environmental Laws have
historically become increasingly more stringent, costs and expenses relating
to environmental control and compliance may increase in the future. Also,
Koppers may have to incur additional capital expenditures and compliance costs
(which it is unable to estimate at this time) in connection with the
resolution of the aforementioned notices of violations. As such, there can be
no assurance that costs of compliance with existing and future Environmental
Laws will not exceed current estimates and will not have a material adverse
effect on the Company's business, financial condition, cash flow and results
of operations.
Under the terms of the asset purchase agreement between Koppers Industries,
Inc. and Koppers Company, Inc. (now known as Beazer East, Inc.) at the
formation of Koppers in 1988 (the "Asset Purchase Agreement"), Beazer East,
Inc. ("Beazer East") assumed the liability for and indemnified Koppers against
(among other things) cleanup liabilities for contamination occurring prior to
the purchase date at sites acquired from Beazer East, and third-party claims
arising from such contamination (the "Indemnity"). Beazer East's performance
of the Indemnity is unconditionally guaranteed by Beazer Limited (the "Beazer
Guarantee"). Contamination identified at sites owned and/or operated by
Koppers is being investigated and remediated under CERCLA, RCRA or state
cleanup programs. Currently, at the sites acquired from Beazer East (which
include all of the CERCLA sites and all but one of the RCRA sites),
substantially all investigation and remediation activities are being conducted
and paid for by Beazer East pursuant to the terms of the Indemnity, however,
there can be no assurance that Beazer East and Beazer Limited will continue to
meet their obligations. In the event they do not, Koppers may be required to
pay such costs which are believed to have averaged approximately $13 million
per year for the last three years. In addition, the government and other third
parties have the right under applicable Environmental Laws to seek relief
directly from Koppers for any and all such costs and liabilities. The
requirements to pay such costs and assume such liabilities without
reimbursement would have a material adverse affect on the business, financial
condition, cash flow and results of operations of the Company. Furthermore, if
Koppers were required to record a contingent liability in respect of
environmental matters covered by the Indemnity on its balance sheets, the
result could be that the Company would have significant negative net worth.
The Indemnity does not afford Koppers indemnification against environmental
costs and liabilities relating to activities or conditions occurring or
arising after the closing of the acquisition of assets from Beazer East under
the Asset Purchase Agreement (the "Asset Closing"), nor is the Indemnity
applicable to liabilities arising in connection with post-closing
acquisitions. At the Clairton facility, the Somerville facility and the
Monessen Facility (each of which Koppers acquired subsequent to the
acquisition of the Beazer East sites), investigations and remediations are
being performed. All applicable indemnification obligations are being honored
at the Clairton and Somerville facilities, and Koppers believes that the
sellers (or their predecessors) at both of these facilities will continue to
conduct and finance most activities directly. Although the Company is not
aware of any reason why such environmental indemnification obligations will
not be performed, if Koppers were required to pay costs associated with these
two sites, it could have a material adverse effect on the Company's business,
financial condition, cash flow and results of operations. At the Monessen
Facility, Koppers has entered into a consent order and agreement (the
"Monessen Consent Order") with Pa-DEP pursuant to which Koppers' liabilities
for environmental cleanup have been capped at $550,000 for matters identified
pursuant to the
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Monessen Consent Order. Although an environmental indemnification was provided
to Koppers by the seller of that facility, the Company does not expect that
such obligations will be honored. If contamination at the Monessen Facility
should be discovered which is not identified pursuant to the Monessen Consent
Order or if the US-EPA should require cleanup above the $550,000 "cap"
contained therein, costs associated with such events could have a material
adverse effect on the Company's business, financial position, cash flow and
results of operations. See "Business--Environmental Matters."
ROOFING CLAIMS
From time to time, the Company is placed on notice of claims and/or suits
arising out of the commercial roofing businesses of the Company. Certain of
such claims are tendered to Beazer East pursuant to the Indemnity. Other such
claims are defended and, where appropriate, settled by the Company. Koppers
maintains a built-up roofing reserve for such claims. As of September 30,
1997, the built-up roofing reserve balance was approximately $4.6 million. The
Company also has comprehensive general liability insurance which includes a
self-insured retention, and also has excess coverage. When appropriate,
insurance carriers are notified of roofing claims. Typically, such claims fall
within the Company's self-insured retention. To the extent that any roofing
claim may exceed the Company's self-insured retention, coverage will depend
upon the specifics of the claim. Depending upon the amount of future claims,
such claims could have a material adverse effect on the Company's business,
financial condition, cash flow and results of operations.
LABOR RELATIONS
As of August 31, 1997, approximately 1,400 of the Company's 2,244 employees
were represented by seventeen different labor unions and covered under 29
separate labor contracts. Labor negotiations are conducted on a plant-by-plant
basis and approximately one-fourth of the outstanding contracts are
renegotiated in any one year. Although the Company believes that it generally
enjoys satisfactory relations with its unions, there can be no assurance that
new agreements will be reached without union action or on terms satisfactory
to the Company. A material work stoppage could adversely affect the Company's
results of operations.
In the last five years, the Company has had three work stoppages due to
strikes at its Follansbee (West Virginia), Somerville (Texas) and Galesburg
(Illinois) facilities. The Follansbee strike occurred in November 1993 and the
Somerville and Galesburg strikes occurred in March 1996. In each instance, the
Company was able to continue operation of the respective facilities at
approximately 85% of capacity and to reach agreement with each of the unions
on terms satisfactory to the Company. There can be no assurance that the
Company will be able to continue operating facilities in the event of further
work stoppages or union disputes in the future.
SEASONALITY; EFFECTS OF WEATHER
Koppers' quarterly operating results fluctuate due to a variety of factors
that are outside Koppers' control, including inclement weather conditions,
which in the past have affected negatively Koppers' operating results.
Operations at several of Koppers' facilities have been halted for short
periods of time during the winter months. Moreover, demand for many of
Koppers' products declines during periods of inclement weather. As a result of
the foregoing, Koppers' anticipates that it may experience material
fluctuations in quarterly results of operations. Over the last five years, the
first, second, third and fourth quarters have averaged 19%, 28%, 29% and 24%,
respectively, of annual Adjusted EBITDA.
FOREIGN OPERATIONS
The Company, both directly and through Tarconord, has operations in seven
foreign countries and sells its products in 13 foreign countries. In both
fiscal 1996 and for the nine months ended September 30, 1997, net sales from
the Company's products sold abroad accounted for approximately 20% of its
total net sales. Risks inherent in foreign operations include changes in
social, political and economic conditions. Changes in currency exchange rates
may affect the relative prices at which the Company and foreign competitors
purchase and sell their products in the same market. The Company does not
routinely hedge its exposure to foreign currency
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exchange rate changes. The Company is also exposed to risks associated with
changes in the laws and policies that govern foreign investments in countries
where it has operations as well as, to a lesser extent, changes in United
States laws and regulations relating to foreign trade and investment. While
such changes in laws, regulations and conditions to date have not had a
material adverse effect on the Company's business or financial condition,
there can be no assurance as to the future effect of any such changes.
CHANGE OF CONTROL
Upon a Change of Control, the holders of the Notes have the right to require
the Company to offer to purchase all of the outstanding Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
purchase. There can be no assurance that the Company will have sufficient
funds available or will be permitted by its other debt agreements to purchase
the Notes upon the occurrence of a Change of Control. In addition, a Change of
Control may require the Company to offer to purchase other outstanding
indebtedness and may cause a default under the New Credit Facilities. The
inability to purchase all of the tendered Notes would constitute an Event of
Default (as defined herein) under the Indenture. See "Description of Notes--
Change of Control."
LACK OF ESTABLISHED MARKET FOR THE NOTES
Prior to the Exchange Offer, there has not been any public market for the
Old Notes. The Old Notes have not been registered under the Securities Act and
will be subject to restrictions on transferability to the extent that they are
not exchanged for the New Notes by holders who are entitled to participate in
the Exchange Offer. The holders of Old Notes (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Old Notes. The New Notes
will constitute a new issue of securities with no established trading market.
The Company does not intend to list the New Notes on any securities exchange
or to seek their admission to trading in any automated quotation system. The
Initial Purchaser has advised the Company that they currently intend to make a
market in the New Notes, but they are not obligated to do so and may
discontinue such market-making at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and may be limited during the Exchange Offer and the pendency of any Shelf
Registration Statement. Accordingly, no assurance can be given that an active
public or other market will develop for the New Notes or as to the liquidity
of the trading market for the New Notes. If a trading market does not develop
or is not maintained, holders of the New Notes may experience difficulty in
reselling the New Notes or may be unable to sell them at all. If a market for
the New Notes develops, any such market may be discontinued at any time.
If a public trading market develops for the New Notes, future trading prices
of the New Notes will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities. Depending on prevailing interest rates, the market for
similar securities and other factors, including the financial condition of the
Company, the New Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES; CONSEQUENCES OF FAILURE TO
EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time
to ensure timely delivery. The Company is under no duty to give notification
of defects or irregularities with respect to the tenders of Old Notes for
exchange. Old Notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof and, upon consummation
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of the Exchange Offer, certain registration rights under the Registration
Rights Agreement will terminate. In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transactions. Each holder of the Old Notes (other than certain
specified holders) who wishes to exchange the Old Notes for New Notes in the
Exchange Offer will be required to represent in the Letter of Transmittal that
(i) it is not an affiliate of the Company, (ii) the New Notes to be received
by it are being acquired in the ordinary course of its business and (iii) at
the time of commencement of the Exchange Offer, it has no arrangement with any
person to participate in the distribution (within the meaning of the
Securities Act) of the New Notes. Each Participating Broker-Dealer that
receives New Notes for its own account in exchange for Old Notes, where such
Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." To the extent that Old Notes are tendered and accepted
in the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
COMPANY HISTORY
The original predecessor to Koppers Company, Inc. was formed in 1912 by a
metallurgist named Heinrich Koppers to design and build coke ovens (Koppers
Company, Inc. and its predecessors are collectively referred to as "Old
Koppers"). Old Koppers gradually expanded into related industries including
coal, gas, chemicals, wood treating, building products, metals and road
materials. Koppers Australia was formed in 1967 as a joint venture between Old
Koppers and Broken Hill. In June 1988, BNS Acquisitions, Inc., a wholly-owned
indirect subsidiary of Beazer PLC (now known as Beazer Limited) acquired Old
Koppers with the intent of retaining the road materials business and selling
the remaining businesses. Koppers was formed in October 1988 by management,
Beazer, Inc. and Koppers Australia to facilitate the acquisition of certain
assets of Old Koppers, including an equity interest in Koppers Australia, for
a purchase price of approximately $227 million. In 1995, the Company acquired
the Somerville, Texas crosstie treating facility ($9.8 million) and the
Monessen Facility ($25.2 million including $20.2 million of refurbishment
costs). In 1996, the Company acquired the Clairton, Pennsylvania tar
distillation facility for approximately $40.0 million cash and the assumption
of certain liabilities.
TRANSACTIONS
On October 15, 1997, the Offeree Stockholders acquired from Cornerstone-
Spectrum, Inc. its voting and non-voting shares of Common Stock in exchange
for $52.5 million of financing obtained from Koppers, Saratoga and Saratoga
Koppers. Koppers loaned the Offeree Stockholders $17.0 million, and Saratoga
and Saratoga Koppers loaned the Offeree Stockholders $35.5 million. In
exchange for forgiveness of the loan provided by Koppers, Saratoga and
Saratoga Koppers, the Offeree Stockholders subsequently transferred 1,350,820
non-voting shares of Common Stock to Koppers and 464,180 non-voting shares of
Common Stock and 2,117,952 voting shares of Common Stock to Saratoga and
Saratoga Koppers in the Saratoga Investment. On December 1, 1997, Saratoga
exchanged the shares of Common Stock it acquired in the Saratoga Investment
for shares of a new series of convertible preferred stock of Koppers
Industries, Inc. which entitles Saratoga to elect a majority of the Board of
Directors and to exercise a majority of the voting power over all outstanding
stock of Koppers Industries, Inc. with respect to all other matters subject to
a stockholder vote. See "Management--Stockholders' Agreement" and "Certain
Relationships and Related Transactions."
Pursuant to a separate Offer to Purchase and Consent Solicitation dated
October 20, 1997, Koppers offered to repurchase all of its outstanding 8 1/2's
in the Tender Offer at a price per $1,000 principal amount of the 8 1/2's
equal to (i) the present value on the payment date of $1,042.50 (the amount
payable on February 1, 1999, which is the first date on which the 8 1/2's are
redeemable) determined on the basis of a yield to such date (the "Tender
24
<PAGE>
Offer Yield") equal to the sum of (x) the yield on the 5 7/8% U.S. Treasury
Note due January 31, 1999 (CUSIP: 9128272F8) (the "Reference Treasury
Security") as of 2:00 p.m., New York City time, on the second business day
immediately preceding the scheduled expiration date of the Tender Offer (the
"Price Determination Date"), plus (y) 50 basis points, minus (ii) $10.00
(collectively, the "Tender Offer Consideration"). Each tendering holder
received accrued and unpaid interest up to, but not including, the payment
date. The yield on the Reference Treasury Security as of 5:00 p.m., New York
City time, on November 13, 1997 was 5.70%. Accordingly, if such yield was
determined to be the yield on the Reference Treasury Security on the Price
Determination Date and December 1, 1997 was the payment date, the Tender Offer
Yield, the Tender Offer Consideration and the total consideration (i.e., the
Tender Offer Consideration plus the consent payment described below) per
$1,000 principal amount of the 8 1/2's would be 6.20%, $1,055.60 and
$1,065.60, respectively.
In connection with the Tender Offer, Koppers obtained consents from the
tendering holders of the 8 1/2's to certain proposed amendments to the
Indenture relating to the 8 1/2's, which eliminated substantially all of the
restrictive covenants and certain events of default contained in such
Indenture. Holders of the 8 1/2's who timely consented to such amendments also
received a consent payment equal to $10.00 per $1,000 principal amount.
The Tender Offer expired at 12:00 midnight, New York City time on November
28, 1997. The Company purchased $98,906,000 of the 8 1/2's in the Tender
Offer, and may repurchase 8 1/2's in the future in open market transactions,
privately negotiated purchases or otherwise, and a portion of the term loan
under the New Credit Facilities will remain initially undrawn but will be
available for such purpose. There can be no assurance, however, that the
Company will make any such repurchases at any time in the future.
Koppers has acquired Broken Hill's 50% interest in Koppers Australia (the
"Koppers Australia Acquisition"). Koppers owned the other 50% interest in
Koppers Australia, which operates businesses similar to Koppers and is the
largest Australian manufacturer and exporter of coal-tar derived products such
as carbon pitch for aluminum smelting; carbon black for tire production; and
naphthalene for use in the manufacture of plasticizers, resins and dye-making.
Koppers Australia, with operating revenue of $134.0 million in the fiscal year
ending June 30, 1997 (based on average month-end exchange rates), is also the
largest Australian producer of wood preservatives and treated timber. The
purchase price for the Koppers Australia acquisition was approximately $65.0
million.
The Company will utilize up to $15.0 million of the net proceeds available
under the New Credit Facilities or from the Offering to redeem shares of
Common Stock held by eligible Management Investors at a price of $17.00 per
share (the "Management Redemption Offer"). The Management Redemption Offer
will be open for a period of 60 days following consummation of the Offering
and the compliance with any applicable securities laws. In addition, the
Company's eight officers and Clayton A. Sweeney (a member of the Board of
Directors) will not be entitled to redeem more than 25% of the shares of
Common Stock held by them individually. Simultaneously with the Management
Redemption Offer, shares of Common Stock will be available for purchase by
Management Investors and certain employees of the Company at a price of $14.00
per share, but Management Investors redeeming shares pursuant to the
Management Redemption Offer will be prohibited from simultaneously purchasing
shares of Common Stock, whether in connection with the Management Redemption
Offer, upon the exercise of options, or otherwise.
As part of the Recapitalization, the Company repaid indebtedness of
approximately $88.1 million under the Company's then current term loan and
revolving credit facilities. In addition, Koppers has entered into an
agreement with APT Holdings Corporation, an affiliate of Mellon Bank, N.A., to
redeem 1,813,200 shares of the non-voting Common Stock for $22.9 million, one-
half of which was redeemed on December 1, 1997 and the remaining shares to be
redeemed in January of 1998.
Also as part of the Recapitalization, the Company redeemed 436,508 non-
voting shares of Common Stock from Saratoga Koppers and paid fees and expenses
related to the Saratoga Investment.
25
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the sale of the Old Notes, combined with net proceeds from the
New Credit Facilities, have been and are being applied to complete the
following transactions: (i) acquisition of Broken Hill's 50% interest in
Koppers Australia, which occurred on December 1, 1997; (ii) the repayment of
all of the 8 1/2's tendered pursuant to the Offer to Purchase and Consent
Solicitation dated October 20, 1997; (iii) the repayment of the outstanding
indebtedness under the Company's then current term loan and revolving credit
facilities; (iv) the redemption of 1,813,200 shares of non-voting Common Stock
owned by APT Holdings Corporation, an affiliate of Mellon Bank, N.A.; (v) the
redemption, at $17.00 per share, of up to 25% of the shares of Common Stock
owned by the current officers of Koppers and Clayton A. Sweeney and the
redemption of up to 100% of the shares of Common Stock owned by any other
Management Investor within sixty (60) days of the consummation of the Offering
and the compliance with any applicable securities laws, at the election of
such individuals, in an aggregate amount not exceeding $15.0 million; (vi) the
redemption of 436,508 non-voting shares of Common Stock from Saratoga Koppers;
and (vii) the payment of related fees and expenses. See "Transactions".
26
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
September 30, 1997, and (ii) on an unaudited pro forma basis to reflect the
Saratoga Investment and the Recapitalization. This table should be read in
conjunction with the Consolidated Financial Statements, including the notes
thereto, included elsewhere in this Prospectus. The Koppers Australia
financial statements were converted to U.S. dollars using the September 30,
1997 exchange rate of 0.725 United States to Australian dollars.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
ACTUAL
-------------------
KOPPERS PRO FORMA COMPANY
KOPPERS AUSTRALIA ADJUSTMENTS PRO FORMA
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Long-term debt, including current
maturities:
Existing and new revolving
credit facilities.............. $ 26,000 $ -- $ (26,000)(A) $ --
Existing term loans............. 53,772 10,762 (62,142)(A) 2,392
New U.S. term loan.............. -- -- 135,000(A) 135,000
New Australian term loan........ -- -- 40,000(A) 40,000
8 1/2's due 2004................ 110,000 -- (110,000)(B) --
Notes offered hereby............ -- -- 175,000(B) 175,000
-------- ------- --------- --------
Total long-term debt.......... 189,772 10,762 151,858 352,392
Stockholders' equity:
Common Stock subject to
redemption..................... 22,940 -- (12,353)(C) 10,587
Senior convertible preferred
stock, par value $.01 per
share; 2,145,624 shares
authorized and issued pro
forma, liquidation value of
$30,000........................ -- -- 21(C) 21
Common Stock, par value $.01 per
share; 10,000,000 shares
authorized; 6,707,952 shares
issued actual, 4,562,328 pro
forma.......................... 67 10,553 (10,574)(C) 46
Non-voting Common Stock, par
value $.01 per share;
10,000,000 shares authorized;
3,628,200 issued actual,
3,600,528 pro forma............ 36 -- -- 36
Additional paid-in capital...... 11,675 -- -- 11,675
Retained earnings............... 66,230 77,156 (75,129)(C) 68,257
Cumulative translation
adjustment..................... (3,589) -- 2,762 (C) (827)
Treasury stock at cost,
1,548,335 actual and
7,156,216 pro forma............ (5,879) -- (76,150)(D) (82,029)
-------- ------- --------- --------
Total preferred and common
equity and Common Stock
subject to redemption........ 91,480 87,709 (171,423) 7,766
-------- ------- --------- --------
Total capitalization.............. $281,252 $98,471 $ (19,565) $360,158
======== ======= ========= ========
</TABLE>
27
<PAGE>
NOTES TO THE CAPITALIZATION TABLE
(A) Reflects the proceeds from the New Credit Facilities consisting of $135.0
million of senior term loans and a $140.0 million revolving credit
facility ($40.0 million and $20.0 million of which will be used for credit
support in the form of letters of credit to obtain a $40.0 million term
loan and a $20.0 million revolving credit facility for Koppers Australia).
The existing term loans of $2.4 million that remain unpaid relate to
Koppers-Hickson Investments Pty. Limited, a 51% owned and consolidated
subsidiary of Koppers Australia.
(B) Reflects the refinancing of the existing 8 1/2's assuming that all of the
$110.0 million aggregate principal amount of the 8 1/2's are tendered
pursuant to the Tender Offer, including an aggregate premium of $7.2
million.
(C) Reflects (i) consolidation of Koppers Australia into the financial
statements of Koppers subsequent to acquisition of the shares held by
Broken Hill, (ii) an extraordinary charge to expense the existing
capitalized debt issuance costs and payment of a premium on the
refinancing of the existing 8 1/2's, (iii) a reclassification of $12.4
million from Common Stock subject to redemption to retained earnings to
reflect redemption of shares of Common Stock owned by Management Investors
and (iv) conversion of certain voting Common Stock into senior convertible
preferred stock held by Saratoga.
(D) Reflects (i) the redemption of voting and non-voting Common Stock from
certain investors, (ii) the transfer of certain voting and non-voting
shares of Common Stock to the Company by the Offeree Shareholders in
exchange for forgiveness of a $17.0 million loan and (iii) a consolidation
adjustment to record Koppers Australia's holdings of voting Common Stock
as treasury stock, subsequent to acquisition.
28
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The historical selected financial information is derived from the historical
Consolidated Financial Statements of Koppers as of and for the years ended
December 31, 1992 through 1996, which have been audited by Ernst & Young, LLP,
independent auditors, and of which the years ended December 31, 1994, 1995 and
1996 are included elsewhere herein. The historical selected financial
information as of and for the nine-month period ended September 30, 1997 and
1996 is derived from the unaudited financial statements included elsewhere
herein.
The following selected historical consolidated financial information should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Pro Forma Consolidated Financial
Data and the Consolidated Financial Statements, related notes and other
financial information included herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
(DOLLARS IN THOUSANDS) -------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL OPERATING
DATA:
Net sales............... $444,255 $461,219 $476,448 $525,730 $588,544 $ 443,510 $ 452,260
Gross profit............ 54,816 44,663 52,235 67,452 70,689 52,721 53,527
Operating profit (1).... 31,799 25,104 25,709 39,848 27,631 21,271 31,968
Other income (expense)
(2).................... 4,990 5,046 5,845 9,615 (3,036) (3,696) 3,282
Interest expense........ 13,949 13,177 13,620 15,060 16,636 12,462 12,387
Income before taxes..... 22,840 16,973 17,934 34,403 7,959 5,113 22,863
Net income (3).......... 14,736 4,748 11,102 24,440 14,098 5,527 22,159
BALANCE SHEET DATA (END
OF PERIOD):
Working capital......... $ 61,082 $ 83,856 $ 79,078 $ 80,095 $ 77,688 $ 76,086 $ 80,345
Total assets............ 271,390 282,520 294,193 348,955 411,180 412,188 395,923
Total debt (4).......... 114,652 113,461 159,000 174,000 209,884 213,420 189,772
Common Stock subject to
redemption (5)......... 550 800 15,450 23,715 23,957 24,800 22,940
Common equity........... 41,209 36,864 36,490 54,255 54,106 46,327 68,540
-------- -------- -------- -------- -------- --------- ---------
Total common equity and
Common Stock subject to
redemption............. 41,759 37,664 51,940 77,970 78,063 71,127 91,480
SELECTED FINANCIAL DATA:
EBITDA (6).............. $ 51,761 $ 46,443 $ 44,342 $ 60,699 $ 47,139 $ 33,795 $ 53,423
Adjusted EBITDA (7)..... 51,761 46,443 46,800 60,699 71,136 52,839 54,837
Depreciation and
amortization (8)........ 18,851 19,425 16,680 17,532 21,793 16,298 17,908
Capital expenditures.... 12,912 14,661 16,326 15,193 21,717 16,134 12,999
Acquisitions and related
capital
expenditures (9)....... -- -- -- 34,948 39,517 39,331 --
SELECTED RATIOS:
EBITDA/interest expense. 3.71x 3.52x 3.26x 4.03x 2.83x 2.71x 4.31x
Adjusted EBITDA/interest
expense................ 3.71x 3.52x 3.44x 4.03x 4.28x 4.24x 4.43x
Total debt/EBITDA....... 2.22x 2.44x 3.59x 2.87x 4.45x
Total debt/Adjusted
EBITDA................. 2.22x 2.44x 3.40x 2.87x 2.95x
Ratio of earnings to
fixed charges (10)..... 2.30x 2.00x 2.00x 2.76x 1.36x 1.31x 2.37x
</TABLE>
- --------
(1) Operating profit for 1994 reflects $2.5 million of severance charges.
Operating profit for the nine months ended September 30, 1996 reflects
$7.4 million of plant closing charges and $2.6 million of severance
charges. Operating profit for the year ended December 31, 1996 includes an
additional $5.4 million of capacity rationalization charges. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(2) Other expense for the year ended December 31, 1996 includes a $10.1
million charge related to the OCF Settlement and a $2.5 million legal
settlement to CSX. Other expense for the nine months ended September 30,
1996 does not include the CSX settlement. Other income includes $4.7
million, $4.6 million, $5.3 million, $9.2 million, $9.6 million, $6.4
million and $4.7 million of equity earnings in affiliates for the years
ended December 31, 1992, 1993, 1994, 1995 and 1996, and for the nine
months ended September 30, 1996 and 1997, respectively.
29
<PAGE>
(3) Net income for 1993 includes effects of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" of ($5.2)
million net of tax, and SFAS No. 109, "Accounting for Income Taxes" of
($0.5) million net of tax. See Notes 7 and 8 of the Notes to Consolidated
Financial Statements of Koppers. Net income for 1994 includes
extraordinary loss on early extinguishment of debt of $1.8 million.
(4) On February 10, 1994 Koppers issued the 8 1/2's.
(5) The Stockholders' Agreement requires Koppers, subject to limitations under
the terms of covenants contained in its debt instruments, to redeem stock
held by Management Investors upon termination of their employment with
Koppers.
(6) EBITDA is as defined in the Indenture. See "Description of Notes." EBITDA
is presented not as an alternative measure of operating results or cash
flow from operations (as determined in accordance with generally accepted
accounting principles), but rather to provide additional information
related to the debt servicing ability of the Company. The Company's
definition of EBITDA may not be comparable to other companies' definitions
of EBITDA. Amortization of deferred financing fees is included in Koppers'
financial statements in depreciation and amortization and amounts to $1.5
million, $1.1 million, $0.8 million, $0.9 million, $0.7 million, $0.5
million and $0.5 million for fiscal years 1992, 1993, 1994, 1995 and 1996
and for the nine months ended September 30, 1996 and 1997, respectively.
(7) Adjusted EBITDA is defined as EBITDA plus the cash portion of non-
recurring charges. The non-recurring charges include the following: 1994--
$2.5 million of severance charges; 1996--$15.5 million of restructuring
charges and $12.6 million of litigation charges for the year ended
December 31; $10.1 million of restructuring charges and $10.1 million of
litigation charges for the nine months ended September 30; and 1997--$1.4
million write-off of costs related to the IPO for the nine months ended
September 30. Adjusted EBITDA is presented not as an alternative measure
of operating results or cash flow from operations (as determined in
accordance with generally accepted accounting principles), but rather to
provide additional information related to the debt servicing ability of
the Company.
(8) The 1994 results reflect a $1.4 million reduction in depreciation expense
for change in estimate of useful lives of certain assets effective July 1,
1994. See Note 1 of the Notes to Consolidated Financial Statements of
Koppers.
(9) Acquisitions and related capital expenditures for 1995 include
approximately $35 million related to the acquisition and modernization of
the Monessen Facility and the acquisition of a wood crosstie treating
facility in Somerville, Texas; acquisitions and related capital
expenditures for fiscal year 1996 and the nine-month period ended
September 30, 1996 each include approximately $40 million related to the
acquisition of a coal tar distillation facility in Clairton, Pennsylvania.
(10) For purposes of calculating the ratio of earnings to fixed charges (i)
earnings consist of income before taxes, extraordinary items and
cumulative effects of accounting changes plus fixed charges and (ii)
fixed charges consist of interest expense incurred excluding amortization
of deferred financing costs, and 41% of rental payments under operating
leases (an amount estimated by management to be the interest portion of
such rentals).
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements (the "Pro Forma Financial Statements") are based on the historical
financial statements of the Company included elsewhere in this Prospectus .
The unaudited pro forma balance sheet has been prepared to give effect to
the Saratoga Investment and Recapitalization as though they were consummated
on September 30, 1997. The unaudited pro forma statement of operations for the
year ended December 31, 1996 gives effect to the Saratoga Investment and
Recapitalization as though they were consummated on January 1, 1996. The
unaudited pro forma statement of operations for the nine months ended
September 30, 1997 gives effect to the Saratoga Investment and
Recapitalization as though they were consummated on January 1, 1997. The
unaudited pro forma statement of operations for the year ended September 30,
1997 gives effect to the Saratoga Investment and Recapitalization as though
they were consummated on October 1, 1996. The pro forma adjustments are based
upon available information and certain assumptions that the Company believes
are reasonable. The acquisition of Koppers Australia will be accounted for
using the purchase method of accounting. The allocation of the purchase price
of Koppers Australia has been determined based upon estimates of fair value
and are subject to change.
The Pro Forma Financial Statements do not purport to be indicative of the
results that would have been obtained had such transactions described above
occurred as of the assumed dates. In addition, the unaudited pro forma
condensed consolidated financial statements do not purport to project the
Company's results of operations for any future date or period. The Pro Forma
Financial Statements should be read in conjunction with the financial
statements of the Company, and the notes thereto, included elsewhere herein.
The actual Koppers Australia financial statements have been converted in the
accompanying unaudited pro forma condensed consolidated financial statements
at the following rates of U.S. dollars to Australian dollars:
<TABLE>
<S> <C>
At September 30, 1997.................................................... .725
Average rate for the year ended December 31, 1996........................ .785
Average rate for the nine month period ended September 30, 1997.......... .760
Average rate for the twelve month period ended September 30, 1997........ .767
</TABLE>
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ACTUAL
------------------ ACQUISITION REDEMPTIONS COMPANY
KOPPERS OF KOPPERS AND PRO
KOPPERS AUSTRALIA AUSTRALIA REFINANCING FORMA
-------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents.. $ 491 $ 6,208 $ -- $ 4,258(D) $ 10,957
Accounts receivable... 75,471 23,371 (4,606)(B) -- 94,236
Inventories........... 67,108 30,404 -- -- 97,512
Other................. 12,833 518 -- -- 13,351
-------- -------- -------- --------- --------
Total current assets. 155,903 60,501 (4,606) 4,258 216,056
Investments............. 49,624 18,155 (50,040)(A) -- 17,739
Fixed assets (net)...... 168,407 45,865 -- -- 214,272
Other assets............ 21,989 914 39,494(B) (3,876)(E) 58,521
-------- -------- -------- --------- --------
Total assets......... $395,923 $125,435 $(15,152) $ 382 $506,588
======== ======== ======== ========= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 35,809 $ 9,318 $ -- $ -- $ 45,127
Accrued liabilities... 31,507 8,297 -- -- 39,804
Current portion of
long-term debt....... 8,242 1,484 -- (9,726)(D) --
-------- -------- -------- --------- --------
Total current
liabilities......... 75,558 19,099 -- (9,726) 84,931
Long-term debt:
Existing and new
revolving credit
facilities........... 26,000 -- -- (26,000)(D) --
Existing term loan.... 45,530 9,278 -- (52,416)(D) 2,392
New U.S. term loan.... -- -- 25,000(C) 110,000(D) 135,000
New Australian term
loan................. -- -- 40,000(C) -- 40,000
8 1/2's due 2004...... 110,000 -- -- (110,000)(F) --
Notes offered hereby.. -- -- 175,000 175,000
-------- -------- -------- --------- --------
181,530 9,278 65,000 96,584 352,392
Other liabilities....... 47,355 9,349 4,795(B) -- 61,499
-------- -------- -------- --------- --------
Total liabilities.... 304,443 37,726 69,795 86,858 498,822
Common Stock subject to
redemption............. 22,940 -- -- (12,353)(G) 10,587
Senior Convertible
Preferred stock........ -- -- -- 21(H) 21
Common Stock, voting and
non-voting............. 103 10,553 (10,553)(A) (21)(H) 82
Retained earnings....... 66,230 77,156 (77,156)(A) 2,027(G) 68,257
Other stockholders'
equity................. 2,207 -- 2,762(A) (76,150)(I) (71,181)
-------- -------- -------- --------- --------
Total liabilities and
stockholders'
equity.............. $395,923 $125,435 $(15,152) $ 382 $506,588
======== ======== ======== ========= ========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(A) Consolidation accounting adjustment to record the elimination of Koppers'
investment in Koppers Australia and Koppers Australia's investment in
Koppers Industries, Inc.
(B) The acquisition of Koppers Australia will be accounted for as a purchase
in accordance with Accounting Principles Board Opinion No. 16, "Business
Combinations." The purchase price is being allocated to tangible and
identifiable intangible assets and liabilities based on preliminary
estimates of their fair values, with the excess purchase price over fair
value allocated to goodwill. Fair value has been determined based on
estimates and is subject to change. The allocation of the increase in
basis is as follows:
32
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Purchase price $65.0
Book value of assets acquired, net of minority interest and
investment in Koppers (30.3)
-----
Increase in basis $34.7
=====
Allocation of increase in basis:
Goodwill $37.8
Senior executive unit trust liability (4.8)
Deferred income tax benefit 1.7
-----
$34.7
=====
</TABLE>
(C) To record the debt assumed in order to finance Koppers' acquisition of
certain common shares of Koppers Australia from Broken Hill. Subsequent to
the purchase, Koppers Australia will become a wholly-owned subsidiary and
consolidated for financial reporting purposes.
(D) To reflect the proceeds from the New Credit Facilities consisting of
$135.0 million of senior term loans and a $140.0 million revolving credit
facility of which $40.0 million and $20.0 million will be used for credit
support in the form of letters of credit to obtain a $40.0 million term
loan and a $20.0 million revolving credit facility for Koppers Australia.
Excess cash available after the transactions will be used for working
capital purposes.
(E) To record the redemption of $15.8 million of voting Common Stock held by
Koppers Australia as treasury stock, subsequent to their acquisition. This
will result in net goodwill of $22.0 million from the Koppers Australia
Acquisition recorded in the consolidated financial statements.
Additionally, certain debt issuance costs of $11.9 million, including
legal fees associated with the refinancing will be capitalized. This will
result in $15.0 million of capitalized debt issuance costs.
(F) To reflect the refinancing of the existing 8 1/2's assuming that all of
the $110.0 million aggregate principal amount of the 8 1/2's are tendered
pursuant to the Tender Offer, including an aggregate premium of $7.2
million.
(G) An extraordinary charge to expense the existing $3.1 million of
capitalized debt issuance costs and payment of a $7.2 million premium on
the refinancing relating to the 8 1/2's and a reclassification of $12.4
million from Common Stock subject to redemption to retained earnings to
reflect the redemption of certain shares of Common Stock from the
Management Investors.
(H) To record the issuance of senior convertible preferred stock upon the
conversion of certain voting common stock held by Saratoga. The senior
convertible preferred stock has a liquidation preference of $30.0 million.
(I) To reflect (i) the acquisition of voting and non-voting Common Stock from
certain investors; (ii) the transfer of certain voting and non-voting
shares of Common Stock to Koppers by the Offeree Shareholders in exchange
for forgiveness of the $17.0 million loan; and (iii) the redemption of
$15.8 million of voting Common Stock held by Koppers Australia as treasury
stock, subsequent to the Koppers Australia Acquisition.
33
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In thousands)
<TABLE>
<CAPTION>
ACTUAL
------------------- ACQUISITION REDEMPTIONS COMPANY
KOPPERS OF KOPPERS AND PRO
KOPPERS AUSTRALIA AUSTRALIA REFINANCING FORMA
-------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $588,544 $138,254 $(4,658)(A) $ -- $722,140
Operating expenses:
Cost of sales......... 496,062 93,367 (4,378)(A) -- 585,051
Depreciation and
amortization......... 21,793 8,545 1,101(B) 745(D) 32,184
Selling, general and
administrative....... 27,545 13,338 -- -- 40,883
Restructuring charges. 15,513 -- -- -- 15,513
-------- -------- ------- -------- --------
Total operating
expenses............ 560,913 115,250 (3,277) 745 673,631
-------- -------- ------- -------- --------
Operating income........ 27,631 23,004 (1,381) (745) 48,509
Equity in earnings of
affiliates........... 9,587 1,470 (8,010)(C) -- 3,047
Other expense......... 12,623 -- -- -- 12,623
Interest expense...... 16,636 979 -- 13,885(E) 31,500
-------- -------- ------- -------- --------
Income before income
taxes and minority
interest............... 7,959 23,495 (9,391) (14,630) 7,433
Income tax provision
(benefits)............. (6,139) 7,439 -- (734)(F) 566
Minority interest....... -- 1,354 -- -- 1,354
-------- -------- ------- -------- --------
Net income from
continuing operations.. $ 14,098 $ 14,702 $(9,391) $(13,896) $ 5,513
======== ======== ======= ======== ========
EBITDA (G).............. $ 75,639
========
Adjusted EBITDA (H)..... $ 99,636
========
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(A) To eliminate the effect of intercompany transactions between Koppers
Australia and Koppers.
(B) To record additional amortization of goodwill recorded related to the
Koppers Australia acquisition using the straight-line method over a 20
year period.
(C) To eliminate the equity in earnings of Koppers Australia recorded by
Koppers and equity in earnings of Koppers recorded by Koppers Australia.
(D) To reflect the additional amortization of debt issuance costs over the
average lives of the related new debt, net of the prior debt issuance
costs.
(E) To record incremental interest expense associated with the
Recapitalization. The interest expense on the Notes is computed at an
interest rate of 9.875%.
(F) To adjust the provision for income taxes based upon the pro forma entries.
(G) "EBITDA" is as defined in the Indenture. See "Description of Notes."
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally
accepted accounting principles), but rather to provide additional
information related to the debt servicing ability of the Company. The
Company's definition of EBITDA may not be comparable to other companies'
definitions of EBITDA. Amortization of deferred financing fees is included
in the Company's financial statements in depreciation and amortization and
amounted to $1.5 million for the year ended December 31, 1996 pro forma.
(H) "Adjusted EBITDA" is defined as EBITDA plus the cash portion of non-
recurring charges. The non-recurring charges include $15.5 million of
restructuring charges and $12.6 million of litigation charges for the year
ended December 31, 1996 pro forma.
34
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
ACTUAL
------------------ ACQUISITION REDEMPTIONS COMPANY
KOPPERS OF KOPPERS AND PRO
KOPPERS AUSTRALIA AUSTRALIA REFINANCING FORMA
-------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $452,260 $87,798 $(1,760)(A) $ -- $538,298
Operating expenses
Cost of sales......... 380,825 62,084 (1,549)(A) -- 441,360
Depreciation and
amortization......... 17,908 6,167 826(B) 559(D) 25,460
Selling, general and
administrative....... 21,559 6,679 -- -- 28,238
-------- ------- ------- -------- --------
Total operating
expenses............. 420,292 74,930 (723) 559 495,058
-------- ------- ------- -------- --------
Operating income........ 31,968 12,868 (1,037) (559) 43,240
Equity in earnings of
affiliates........... 4,696 4,162 (6,631)(C) -- 2,227
Interest expense...... 12,387 360 -- 10,878(E) 23,625
Other expense......... 1,414 1,285 -- -- 2,699
-------- ------- ------- -------- --------
Income before income
taxes and minority
interest............... 22,863 15,385 (7,668) (11,437) 19,143
Income tax provision
(benefit).............. 704 4,648 -- (571)(F) 4,781
Minority interest....... -- 992 -- -- 992
-------- ------- ------- -------- --------
Net income from
continuing operations.. $ 22,159 $ 9,745 $(7,668) $(10,866) $ 13,370
======== ======= ======= ======== ========
EBITDA (G).............. $ 68,518
========
Adjusted EBITDA (H)..... $ 69,932
========
</TABLE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(A) To eliminate the effect of intercompany transactions between Koppers
Australia and Koppers.
(B) To record additional amortization of goodwill relating to the Koppers
Australia acquisition using the straight-line method over a 20 year
period.
(C) To eliminate the equity in earnings of Koppers Australia recorded by
Koppers and equity in earnings of Koppers recorded by Koppers Australia.
(D) To reflect the additional amortization of debt issuance costs over the
average lives of the related new debt, net of the prior debt issuance
costs.
(E) To record incremental interest expense associated with the
Recapitalization. The interest expense on the Notes is computed at an
interest rate of 9.875%.
(F) To adjust the provision for income taxes based upon the pro forma entries.
(G) "EBITDA" is as defined in the Indenture. See "Description of Notes."
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally
accepted accounting principles), but rather to provide additional
information related to the debt servicing ability of the Company. The
Company's definition of EBITDA may not be comparable to other companies'
definitions of EBITDA. Amortization of deferred financing fees is included
in the Company's financial statements in depreciation and amortization and
amounted to $1.1 million for the nine months ended September 30, 1997 pro
forma.
(H) "Adjusted EBITDA" is defined as EBITDA plus the cash portion of non-
recurring charges. The non-recurring charges include a $1.4 million write-
off of costs related to the IPO for the nine months ended September 30,
1997 pro forma.
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS FOR THE TWELVE
MONTH PERIOD ENDED SEPTEMBER 30, 1997
(In thousands)
<TABLE>
<CAPTION>
ACTUAL
------------------- ACQUISITION REDEMPTIONS COMPANY
KOPPERS OF KOPPERS AND PRO
KOPPERS AUSTRALIA AUSTRALIA REFINANCING FORMA
-------- --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $597,294 $123,580 $ (3,290)(A) $ -- $717,584
Operating expenses:
Cost of sales......... 502,396 86,156 (3,079)(A) -- 585,473
Depreciation and
amortization......... 23,403 8,238 1,101(B) 745(D) 33,487
Selling, general and
administrative....... 27,725 9,823 -- -- 37,548
Restructuring charges. 5,442 -- -- -- 5,442
-------- -------- -------- -------- --------
Total operating
expenses............. 558,966 104,217 (1,978) 745 661,950
-------- -------- -------- -------- --------
Operating income........ 38,328 19,363 (1,312) (745) 55,634
Equity in earnings of
affiliates........... 7,856 6,031 (10,698)(C) -- 3,189
Interest expense...... 16,561 564 -- 14,375(E) 31,500
Other expense......... 3,914 1,276 -- -- 5,190
-------- -------- -------- -------- --------
Income before income
taxes and minority
interest............... 25,709 23,554 (12,010) (15,120) 22,133
Income tax provision
(benefits)............. (5,021) 7,022 -- (731)(F) 1,270
Minority interest....... -- 1,398 -- -- 1,398
-------- -------- -------- -------- --------
Net income from
continuing operations.. $ 30,730 $ 15,134 $(12,010) $(14,389) $ 19,465
======== ======== ======== ======== ========
EBITDA (G).............. $ 89,437
========
Adjusted EBITDA (H)..... $ 95,804
========
</TABLE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(A) To eliminate the effect of intercompany transactions between Koppers
Australia and Koppers.
(B) To record additional amortization of goodwill relating to the Koppers
Australia acquisition using a straight-line method over a 20 year period.
(C) To eliminate the equity in earnings of Koppers Australia recorded by
Koppers and equity in earnings of Koppers recorded by Koppers Australia.
(D) To reflect the additional amortization of debt issuance costs over the
average lives of the related new debt, net of the prior debt issuance
costs.
(E) To record incremental interest expense associated with the
Recapitalization. The interest expense on the Notes is computed at an
interest rate of 9.875%.
(F) To adjust the provision for income taxes based upon the pro forma entries.
(G) "EBITDA" is as defined in the Indenture. See "Description of Notes."
EBITDA is presented not as an alternative measure of operating results or
cash flow from operations (as determined in accordance with generally
accepted accounting principles), but rather to provide additional
information related to the debt servicing ability of the Company. The
Company's definition of EBITDA may not be comparable to other companies'
definitions of EBITDA. Amortization of deferred financing fees is included
in the Company's financial statements in depreciation and amortization and
amounted to $1.5 million for the twelve months ended September 30, 1997
pro forma.
(H) "Adjusted EBITDA" is defined as EBITDA plus the cash portion of non-
recurring charges. The non-recurring charges include $5.4 million of
restructuring charges, $2.5 million of litigation charges and a $1.4
million write-off of IPO costs for the twelve months ended September 30,
1997 pro forma.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company is a leading integrated producer of carbon compounds and treated
wood products for use in a variety of markets. The Company's products and
operations are divided into four businesses: Carbon Materials & Chemicals,
Railroad & Utility Products, Coke Products and Koppers Australia. The pro
forma numbers include Koppers Australia as a wholly-owned subsidiary of
Koppers.
RESULTS OF OPERATIONS
The following table sets forth certain sales and operating data, net of all
inter-segment transactions, for the Company's businesses for the periods
indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------ ----------------------------------------
PRO FORMA
------------------
1994 1995 1996 1996 1997 1996 1997
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES (IN
THOUSANDS):
Carbon Materials &
Chemicals........... $164,489 $197,434 $239,298 $178,609 $185,766 $178,609 $185,766
Railroad & Utility
Products............ 239,596 248,212 239,913 184,290 193,807 184,290 193,807
Coke Products........ 72,363 80,084 109,333 80,611 72,687 80,611 72,687
Koppers Australia.... -- -- -- -- -- 99,372 86,038
-------- -------- -------- -------- -------- -------- --------
Total.............. $476,448 $525,730 $588,544 $443,510 $452,260 $542,882 $538,298
======== ======== ======== ======== ======== ======== ========
SEGMENT SALES AS PERCENTAGE OF
TOTAL:
Carbon Materials &
Chemicals........... 34.5% 37.6% 40.7% 40.3% 41.0% 32.9% 34.5%
Railroad & Utility
Products............ 50.3% 47.2% 40.8% 41.5% 42.9% 33.9% 36.0%
Coke Products........ 15.2% 15.2% 18.5% 18.2% 16.1% 14.9% 13.5%
Koppers Australia.... -- -- -- -- -- 18.3% 16.0%
-------- -------- -------- -------- -------- -------- --------
Total.............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
GROSS MARGIN BY SEGMENT
(AFTER DEPRECIATION):
Carbon Materials &
Chemicals........... 14.9% 18.0% 17.0% 16.2% 18.1% 18.1%
Railroad & Utility
Products............ 9.8% 12.4% 10.9% 10.9% 11.7% 11.7%
Coke Products........ 5.9% 2.5% 4.6% 5.3% (2.6%) (2.6%)
Koppers Australia.... -- -- -- -- -- 22.3%
-------- -------- -------- -------- -------- -------- --------
Total.............. 10.8% 12.8% 12.0% 11.9% 11.8% 13.3%
OPERATING MARGIN BY
SEGMENT:
Carbon Materials &
Chemicals........... 10.3% 13.9% 10.3% 8.6% 14.8% 14.8%
Railroad & Utility
Products............ 6.8% 9.1% 7.0% 6.9% 8.9% 8.9%
Coke Products........ 3.6% 0.0% (3.2%) 2.2% (5.3%) (5.3%)
Koppers Australia.... -- -- -- -- -- 14.6%
Corporate Unallocated
Overhead............ (2.1%) (1.9%) (1.7%) (1.9%) (2.0%) (1.9%)
-------- -------- -------- -------- -------- -------- --------
Total.............. 5.4% 7.6% 4.7% 4.8% 7.1% 8.0%
</TABLE>
Comparison of Results of Operations for the Nine Months Ended September 30,
1997 and 1996.
NET SALES. Net sales for the nine months ended September 30, 1997 were 2.0%
higher than the same period in 1996. Net sales for Carbon Materials &
Chemicals increased by 4.0% due primarily to sales from the Clairton,
Pennsylvania facility acquired in April, 1996 coupled with increases in
volumes and prices for PAA of 17.6% and 6.9%, respectively. The increase in
net sales of 5.2% for Railroad & Utility Products was due to higher railroad
crosstie revenues, which more than offset a 2.9% reduction in sales volumes
for utility poles. Net sales for Coke Products decreased by 9.8% due to lower
production and shipments primarily as the result of capacity rationalization
at the Woodward, Alabama coke facility ("Woodward Coke Facility").
37
<PAGE>
GROSS PROFIT AFTER DEPRECIATION. As a percent of net sales, gross profit
after depreciation decreased to 11.8% for the nine months ended September 30,
1997 from 11.9% for the same period last year. Gross margin for Carbon
Materials & Chemicals increased to 18.1% from 16.2% in the prior year
primarily as the result of increases in volumes and pricing of PAA in 1997 as
noted above. Gross margin for Railroad & Utility Products increased to 11.7%
from 10.9% in the prior year primarily as the result of higher revenues for
railroad crossties. Gross margin for Coke Products decreased to (2.6%) from
5.3% due to higher unit costs incurred as the result of reduced production at
the Woodward Coke Facility, coupled with costs associated with unusual returns
and credits issued to customers.
DEPRECIATION AND AMORTIZATION. The increase in depreciation and amortization
for the nine months ended September 30, 1997 as compared to the prior year was
due primarily to the acquisition of the Clairton tar distillation facility in
April 1996 and the Company's ongoing capital expenditures program.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for the nine months ended September 30, 1997 amounted
to 4.8% of net sales, which was consistent with the prior year period, as
lower expenses for legal and consulting services were offset by increases in
employee benefits in 1997.
EQUITY IN EARNINGS OF AFFILIATES. Equity earnings for the nine months ended
September 30, 1997 were $1.7 million lower than the prior year period
primarily as a result of lower earnings from Koppers Australia. The lower
earnings were due to higher maintenance and repair expenses and a stronger
U.S. currency rate in 1997.
OTHER EXPENSE. Other expense for the nine months ended September 30, 1997
consisted of the write-off of $1.4 million of deferred expenses related to the
IPO which was withdrawn in the second quarter. Other expense for the prior-
year period consisted of a litigation charge related to the OCF Settlement.
See Note 11 of the Notes to Consolidated Financial Statements of Koppers.
INCOME TAXES. The effective income tax rate for the nine months ended
September 30, 1997 was 3.1% as compared to (8.1%) in the prior-year period due
to lower income in 1996 as the result of the OCF Settlement and restructuring
charges coupled with the utilization of energy tax credits from the Monessen
Facility. The credit is based on its production of coke as a non-conventional
fuel source and the sale thereof to unrelated third parties. The credit is
available through December 31, 2002 and, based on current production levels at
the Monessen Facility, could provide up to a maximum $10.2 million of tax
credits annually, unadjusted for inflation and assuming full production at the
Monessen Facility, until the credit expires. Use of the tax credits is limited
to the availability of taxable income.
NET INCOME. Net income for the nine months ended September 30, 1997 as
compared to the prior year increased by $16.6 million due primarily to
litigation and restructuring charges taken in 1996.
Comparison of Results of Operations for the Years Ended December 31, 1996 and
1995.
NET SALES. Net sales for the year ended December 31, 1996 were 11.9% higher
than the same period in 1995, due primarily to the effect of acquisitions in
the Carbon Materials & Chemicals and Coke Products businesses. Net sales for
Carbon Materials & Chemicals increased by 21.2% due primarily to sales of
approximately $44 million from the Clairton facility acquired April 1, 1996.
The effect of the acquisition was offset to some extent by a net reduction in
PAA sales due to a 31.9% reduction in average PAA prices. Net sales for
Railroad & Utility Products decreased by 3.3% due to a 12.2% reduction in
sales volumes for utility poles as a result of public utility deregulation and
its impact on maintenance programs and due to disruptions in shipments as a
result of severe weather conditions in the first quarter of 1996. Net sales
for Coke Products increased by 36.5% due primarily to sales of approximately
$44 million from the Monessen Facility in its first full year of operation.
This increase was offset to some extent by a 10.6% reduction in sales at the
Woodward Coke Facility resulting primarily from suspensions of shipments to
U.S. Steel Group, a unit of USX Corporation, (due to an explosion at one of
their blast furnaces) and McLouth Steel Products Corp. (due to its filing of a
bankruptcy
38
<PAGE>
petition and its cessation of business) in 1996, as well as reduced production
in the first quarter of 1996 as a result of severe weather conditions.
GROSS PROFIT AFTER DEPRECIATION. As a percent of net sales, gross profit
after depreciation decreased to 12.0% for the year ended December 31, 1996
from 12.8% for the prior year. Gross margin decreased to 17.0% from 18.0% for
Carbon Materials & Chemicals and to 10.9% from 12.4% for Railroad & Utility
Products, while gross margin for Coke Products increased to 4.6% from 2.5%.
The decrease for Carbon Materials & Chemicals was due to a 31.9% reduction in
PAA prices, which more than offset the positive margin effect of the Clairton
acquisition. The decrease in gross profit for Railroad & Utility Products was
due to higher unit costs for utility poles as a result of a 12.2% decline in
sales volumes and $0.6 million of costs associated with labor disruptions and
increased operating expenses as a result of severe winter weather in the first
quarter of 1996. The increase for Coke Products was due primarily to higher
coke prices of 2.8% coupled with higher volumes of 33.2%, as an increase in
volumes due to a full twelve months of operations at the Monessen Facility was
partially offset by volume reductions at the Woodward Coke Facility.
DEPRECIATION AND AMORTIZATION. The increase in depreciation and amortization
for 1996 as compared to the prior year was due primarily to the acquisition of
the Clairton tar distillation facility in April 1996, and the Monessen
Facility which started production in November 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for 1996 decreased to 4.7% of net sales from 5.3% of
net sales in the prior year, primarily due to a reduction in management
incentive accruals.
RESTRUCTURING CHARGES. Restructuring charges were comprised of plant closing
charges of $7.4 million, capacity rationalization charges of $5.4 million and
severance charges of $2.6 million. Plant closing charges included $6.5 million
for the Houston carbon materials facility and $0.9 million for the Carrollton,
Ohio refractory materials facility. The plant closing charges consisted
primarily of write-downs of property and equipment, environmental remediation
and severance costs. Capacity rationalization charges of $5.4 million at the
Woodward Coke Facility primarily include property and equipment write-downs.
Severance charges totaling $2.6 million were incurred as a result of workforce
reductions of approximately 90 salaried employees at various field locations
and at corporate headquarters.
EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates increased
to $9.6 million for 1996 from $9.2 million in the prior year as higher
earnings from Koppers Australia and KSA (as defined herein) were partially
offset by lower earnings from Tarconord as a result of weaker European market
conditions.
LITIGATION CHARGES. Litigation charges for 1996 consisted of a $10.1 million
charge related to the OCF Settlement and a $2.5 million legal settlement
payment to CSX.
INTEREST EXPENSE. Interest expense increased $1.6 million for 1996 compared
to the prior year primarily as a result of the additional $40.0 million in
indebtedness to finance the acquisition of the Clairton facility.
INCOME TAXES. The effective income tax rate for 1996 was a benefit of
(77.1)% as compared to an effective rate of 29.0% in the prior year as a
result of lower pretax earnings in 1996 coupled with the utilization of a 1996
energy tax credit for the Monessen Facility.
NET INCOME. Net income for 1996 as compared to the prior year decreased by
$10.3 million primarily as a result of $15.5 million of restructuring charges
and $12.6 million of litigation charges. These charges were offset in part by
lower tax expense of $16.1 million in 1996 as compared to the prior year.
Earnings from the recently acquired Monessen Facility and the Clairton
facility were offset by lower PAA prices and the suspension of coke shipments
to U.S. Steel Group and McLouth Steel Products Corp. for the reasons
indicated.
39
<PAGE>
Comparison of Results of Operations for the Years Ended December 31, 1995 and
1994.
NET SALES. Net sales for the year ended December 31, 1995, were 10.3% higher
than the corresponding period in 1994, as net sales of Carbon Materials &
Chemicals increased by 20.0%, net sales of Railroad & Utility Products
increased by 3.6%, and net sales of Coke Products increased by 10.7%. The
increase in net sales of Carbon Materials & Chemicals for 1995 primarily
reflected a 52.7% increase in PAA prices and a 13.0% increase in carbon pitch
volumes. The increase in net sales of Railroad & Utility Products for 1995
reflected higher sales volumes of 10.7% for railroad crossties primarily as a
result of sales from the newly acquired Somerville facility, offset by a 13.9%
decline in volumes for utility poles. Prices for railroad crossties decreased
2.2%, while pricing for utility poles increased 9.3% in 1995 compared to the
prior year. The increase in net sales of Coke Products was due to a 6.4%
increase in coke prices, as well as a 6.1% increase in coke volumes primarily
due to shipments of coke in November and December from the newly acquired
Monessen Facility.
GROSS PROFIT AFTER DEPRECIATION. As a percent of net sales, gross profit
after depreciation increased to 12.8% in 1995 from 10.8% in 1994. The increase
in Carbon Materials & Chemicals gross margin to 18.0% from 14.9%, coupled with
an increase in Railroad & Utility Products gross margin to 12.4% from 9.8%,
more than offset a decrease in gross margin for Coke Products to 2.5% from
5.9% as compared to the prior year. The increase in gross margin for Carbon
Materials & Chemicals was primarily a result of a 52.7% increase in selling
prices for PAA. This increase was partially offset by a $1.8 million provision
for the effect of a coal tar spill at a Carbon Materials & Chemicals facility.
The increase in Railroad & Utility Products gross margin was primarily a
result of lower raw materials costs coupled with lower freight costs from
logistics improvements and an increase in selling prices for utility poles.
The decrease in Coke Products gross margin for 1995 was primarily a result of
$5.5 million of start-up expenses, which were not capitalized, at the Monessen
Facility in 1995. Excluding the start-up expenses, gross margin would have
increased to 9.4% of net sales, reflecting a 6.4% price increase for coke.
DEPRECIATION AND AMORTIZATION. The increase in depreciation and amortization
in 1995 compared to the prior year was primarily due to approximately $0.8
million of depreciation related to the acquisition of the Somerville facility.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense for 1995 increased to 5.3% of sales from 5.1% of sales
in 1994, primarily due to increased management incentive accruals in 1995.
RESTRUCTURING CHARGES. Restructuring charges for 1994 included $2.5 million
related to a voluntary severance plan initiated as part of a general corporate
restructuring. The total charge reflected salaries and benefits for 55
participating employees.
EQUITY IN EARNINGS OF AFFILIATES. Equity in earnings of affiliates increased
to $9.2 million in 1995 from $5.3 million in 1994, primarily as a result of
stronger carbon pitch and chemicals markets in Australia and Europe.
INTEREST EXPENSE. Interest expense for 1995 increased by $1.4 million as a
result of higher average debt levels due to acquisitions coupled with slightly
higher interest rates.
INCOME TAXES. The effective income tax rate for 1995 increased to 29.0% from
28.0% in 1994. The difference between the effective rates and the statutory
rate was primarily a result of earnings in foreign equity affiliates not taxed
in the United States. Income taxes on equity earnings in foreign affiliates
are limited to the amount of cash dividends received.
NET INCOME. Net income for 1995 increased 140.6% compared to net income from
the prior year, due in part to a $1.8 million extraordinary charge for early
extinguishment of debt in 1994, and also as a result of a higher level of
business activity and generally favorable market conditions in 1995 as
detailed in the discussions of sales and gross profit for the businesses.
40
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily for debt service and capital
maintenance. The Company believes that its cash flows from operations and
available borrowings under its bank credit facilities will be sufficient to
fund its anticipated liquidity requirements for the next twelve months. In the
event that the foregoing sources are not sufficient to fund the Company's
expenditures and service its indebtedness, the Company would be required to
raise additional funds.
As of September 30, 1997 on a pro forma basis after giving effect to the
Saratoga Investment and the Recapitalization, the Company would have had $80.0
million of revolving credit availability under the New Credit Facilities for
working capital purposes, subject to restrictions imposed under the Indenture
related to the Notes offered hereby. As of September 30, 1997, $8.5 million of
commitments were utilized by outstanding standby letters of credit.
Cash provided by operating activities totaled $35.6 million for the nine
months ended September 30, 1997, compared to $31.7 million for the same period
last year, as higher earnings and lower working capital requirements in 1997
(excluding legal settlement reserves) were offset to some extent by cash
expenses in 1997 related to 1996 restructuring charges.
Capital expenditures for Koppers were $13.0 million for the nine months
ended September 30, 1997 versus $16.1 million (excluding acquisitions) for the
same period last year, with the decrease in 1997 due primarily to significant
1996 capital improvements at the Stickney PAA plant and the Monessen Facility.
In April 1996, Koppers purchased the coal chemical business of Aristech
Chemical Corporation ("Aristech") located in Clairton, Pennsylvania for
approximately $40.0 million cash and the assumption of certain liabilities.
See Note 3 of the Notes to Consolidated Financial Statements of Koppers.
For the years ended December 31, 1997 and 1998 the Company anticipates
capital expenditures of $26.8 million and $26.3 million, respectively. These
amounts include environmental capital expenditures of $3.8 million and $6.9
million for 1997 and 1998, respectively, with the remaining portions for
capital maintenance and improvements.
Financing activities utilized $24.2 million in cash for the nine months
ended September 30, 1997 compared to providing $21.9 million for the same
period last year. Cash used in 1997 included approximately $20.1 million of
debt repayment; cash supplied by financing activities in 1996 was largely the
result of the $35.0 million term loan for the Clairton acquisition coupled
with a net increase of $15.5 million in the revolving credit facility, used in
part to provide for a $12.0 million term loan repayment and a $12.3 million
purchase of non-voting Common Stock of the Company. See Note 5 of the Notes to
Consolidated Financial Statements of Koppers.
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds from the sale of the Old Notes, combined with net proceeds from the
New Credit Facilities, have been and are being applied to complete the
following transactions: (i) the acquisition of Broken Hill's 50% interest in
Koppers Australia, which occurred on December 1, 1997; (ii) the repayment of
all of the 8 1/2's tendered pursuant to the Offer to Purchase and Consent
Solicitation dated October 20, 1997; (iii) the repayment of the outstanding
indebtedness under the Company's then current term loan and revolving credit
facilities; (iv) the redemption of 1,813,200 shares of non-voting Common Stock
owned by APT Holdings Corporation, an affiliate of Mellon Bank, N.A.; (v) the
redemption, at $17.00 per share, of up to 25% of the shares of Common Stock
owned by the current officers of Koppers and Clayton A. Sweeney and the
redemption of up to 100% of the shares of Common Stock owned by any other
Management Investor within sixty (60) days of the consummation of the offering
and the compliance with any applicable securities laws, at the election of
such individuals, in an aggregate amount not exceeding $15.0 million; (vi) the
redemption of 436,508 non-voting shares of Common Stock from Saratoga Koppers;
and (vii) the payment of related fees and expenses.
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Restructuring Charges. Restructuring charges for 1996 consisted of $11.4
million and $4.1 million of cash and non-cash charges, respectively. At
September 30, 1997, $6.8 million of the total cash charges had been expended.
Seasonality; Effects of Weather. The Company's quarterly operating results
fluctuate due to a variety of factors that are outside Koppers' control,
including inclement weather conditions, which in the past have affected
operating results. Operations at several of Koppers' facilities have been
halted for short periods of time during the winter months. Moreover, demand
for many of Koppers' products declines during periods of inclement weather. As
a result of the foregoing, the Company anticipates that it may experience
material fluctuations in quarterly operating results.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement 128
on the calculation of earnings per share for the nine months ended September
30, 1997 and September 30, 1996 is not expected to be material.
Additionally, the following statements have been issued during 1997 and are
effective for fiscal years beginning after December 15, 1997:
Statement No. 129, "Disclosure of Information about Capital Structure",
requires additional disclosures about an entity's capital structure.
Statement No. 130, "Reporting Comprehensive Income", requires enterprises to
classify items of comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in-capital.
Statement No. 131, "Disclosure about Segments of an Enterprise and Related
Information" changes the way companies report segment information in annual
reports and in interim financial statements.
The Company does not expect the effect of adoption of Statements No. 129,
130 or 131 to be material.
ENVIRONMENTAL MATTERS
Like companies involved in similar environmentally sensitive businesses, the
Company's operations and properties are subject to extensive Environmental
Laws. The Clean Air Act and Clean Water Act, each as amended, impose stringent
standards on air emissions and water discharges, respectively. Under RCRA, a
facility that treats, stores or disposes of hazardous waste on-site may be
liable for corrective action costs, and a facility that holds a RCRA permit
may have to incur costs relating to the closure of certain "hazardous" or
"solid" waste management units. Under CERCLA and similar state laws, an owner
or operator of property at which releases of hazardous substances have
occurred may be liable for investigation and remediation of any resulting
contamination and related natural resource damages. In addition, under CERCLA,
the generator of hazardous substances may be strictly, and jointly and
severally liable for any required investigation or remediation at third-party
disposal sites and related natural resource damages. The Environmental Laws
are subject to frequent amendment. The sanction for failure to comply with
such Environmental Laws can include significant civil penalties, criminal
penalties, injunctive relief and denial or loss of, or imposition of
significant restrictions on, environmental permits. In addition, the Company
could be subject to suit by third parties in connection with violations of or
liability under Environmental Laws.
In March 1996, Jefferson County issued a notice of violation in connection
with various alleged violations of air pollution control regulations regarding
emissions from coke oven batteries at the Woodward Coke Facility. In February
1997, the US-EPA issued a notice of violation covering the same issues.
Thereafter, Koppers
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discovered that certain benzene abatement equipment at this facility had not
been operational for several months. Koppers and Jefferson County have
negotiated a settlement agreement which includes both the original Jefferson
County notice of violation and the self-reported benzene abatement violation,
and requires Koppers to pay a civil penalty in the amount of $450,000, which
sum has been paid. There can be no assurance that the settlement with
Jefferson County will deter the US-EPA from pursuing its notice of violation.
Following a preliminary investigation of the Woodward Coke Facility, Koppers
also discovered that certain environmental reports and records required under
the Clean Water Act contained incomplete and inaccurate information and that
certain environmental reports and certifications were not filed when required.
Corrected reports have been submitted to Jefferson County, the State of
Alabama and the US-EPA. In June 1997, during a routine environmental
compliance audit of the Logansport Wood Treating Facility, it was discovered
that certain records and reports required under the Clean Water Act contained
incomplete and inaccurate information. Corrected reports have been submitted
to the local municipality, the State of Louisiana and the US-EPA. Although no
notice of violation has been issued in conjunction with this issue, it is
likely that such a notice will be issued and substantial penalties sought by
the regulatory authorities. On April 25, 1997, Koppers was served with notices
of violation by Pa-DEP which alleged that Koppers was in violation of a Pa-DEP
plan approval for the Monessen Facility regarding nitrogen oxide emissions and
failed to conduct timely emission-monitoring testing on Monessen Facility
boilers. Koppers could be subject to significant liability in connection with
each of these matters, including injunctive relief, substantial civil and
criminal penalties and the risk of third-party lawsuits. Resolution of these
and other pending compliance matters could have a material adverse effect on
the business, financial condition, cash flow and results of operations of the
Company.
For each of the last three fiscal years, the Company's average capital
expenditures and operating expenses for environmental matters, including
depreciation, amounted to approximately $7.0 million and $16.0 million,
respectively. The Company believes that environmental operating costs as a
percentage of total operating costs will not change materially from those
incurred during the past three years. The Company currently estimates that
capital expenditures in connection with matters relating to environmental
control will be approximately $3.8 million and $6.9 million for 1997 and 1998,
respectively. Because Environmental Laws have historically become
increasingly more stringent, costs and expenses relating to environmental
control and compliance may increase in the future. Also, Koppers may have to
incur additional capital expenditures and compliance costs (which it is unable
to estimate at this time) in connection with the resolution of the
aforementioned notices of violations. As such, there can be no assurance that
costs of compliance with existing and future Environmental Laws will not
exceed current estimates and will not have a material adverse effect on the
Company's business, financial condition, cash flow and results of operations.
Under the terms of the Asset Purchase Agreement between Koppers Industries,
Inc. and Old Koppers (now known as Beazer East, Inc.) at the formation of the
Company in 1988, Beazer East assumed the liability for and indemnified Koppers
against (among other things) cleanup liabilities for contamination occurring
prior to the purchase date at sites acquired from Beazer East, and third-party
claims arising from such contamination in the Indemnity. Beazer East's
performance of the Indemnity is unconditionally guaranteed by Beazer Limited
under the Beazer Guarantee. Contamination identified at sites owned and/or
operated by Koppers is being investigated and remediated under CERCLA, RCRA or
state cleanup programs. Currently, at the sites acquired from Beazer East
(which include all of the CERCLA sites and all but one of the RCRA sites),
substantially all investigation and remediation activities are being conducted
and paid for by Beazer East pursuant to the terms of the Indemnity; however,
there can be no assurance that Beazer East and Beazer Limited will continue to
meet their obligations. In the event they do not, Koppers may be required to
pay such costs which are believed to have averaged approximately $13.0 million
per year for the last three years. In addition, the government and other third
parties have the right under applicable Environmental Laws to seek relief
directly from Koppers for any and all such costs and liabilities. The
requirements to pay such costs and assume such liabilities without
reimbursement would have a material adverse affect on the business, financial
condition, cash flow and results of operations of the Company. Furthermore, if
Koppers were required to record a contingent liability in respect of
environmental matters covered by the Indemnity on its balance sheets, the
result could be that the Company would have significant negative net worth.
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The Indemnity does not afford Koppers indemnification against environmental
costs and liabilities relating to activities or conditions occurring or
arising after the Closing of the acquisition of assets from Beazer East under
the Asset Purchase Agreement, nor is the Indemnity applicable to liabilities
arising in connection with post-closing acquisitions. At the Clairton
facility, the Somerville facility and the Monessen Facility (each of which
Koppers acquired subsequent to the acquisition of the Beazer East sites),
investigations and remediations are being performed. All applicable
indemnification obligations are being honored at the Clairton and Somerville
facilities and Koppers believes that the sellers (or their predecessors) at
both of these facilities will continue to conduct and finance most activities
directly. Although the Company is not aware of any reason why such
environmental indemnification obligations will not be performed, if Koppers
were required to pay costs associated with these two sites, it could have a
material adverse effect on the Company's business, financial condition, cash
flow and results of operations. At the Monessen Facility, Koppers has entered
into the Monessen Consent Order with Pa-DEP pursuant to which the Koppers'
liabilities for environmental cleanup have been capped at $550,000 for matters
identified pursuant to the Monessen Consent Order. Although an environmental
indemnification was provided to Koppers by the seller of that facility, the
Company does not expect that such obligations will be honored. If
contamination at the Monessen Facility should be discovered which is not
identified pursuant to the Monessen Consent Order or if the US-EPA should
require cleanup above the $550,000 "cap" contained therein, costs associated
with such events could have a material adverse effect on the Company's
business, financial position, cash flow and results of operations. See
"Business--Environmental Matters."
OTHER MATTERS
As a result of an internal investigation, the Company discovered in March
1997 that certain reports relating to the moisture of coke contained
incomplete and inaccurate information. Because of these discrepancies, certain
customers who purchased the coke were overbilled. Upon discovery of the
overbilling, refunds were made available to all the affected customers.
For a fee, the Company treats waste water produced by Beazer East during
Beazer East's remediation of certain of the Company's facilities. Beazer East
performs these remediation activities pursuant to the Indemnity. During the
summer of 1997, Beazer East challenged the amounts of the charges for waste
water treatment services at the Florence and Follansbee facilities. Beazer
East alleged they had been overcharged by approximately $2.2 million at
Florence and by approximately $3.1 million at Follansbee. The Company has
contested these allegations and believes that if an overcharge occurred, the
amount of the overcharge is less than Beazer East has alleged.
Due to the advanced ages of the coke oven batteries, ongoing environmental
compliance issues and significant capital expenditure requirements, all of
which have combined to reduce productive capacity and increase per unit costs,
the Company's Board of Directors has authorized the Company to close the
Woodward Coke Facility in early 1998. This will result in a charge to earnings
in the fourth quarter of 1997 of approximately $38.5 million, $9.4 million of
which will be cash charges primarily for dismantling and severance costs.
Sales and gross profit (loss) at the Woodward Coke Facility for the twelve
months ended September 30, 1997 amounted to $58.1 million and ($6.1) million,
respectively. Capital expenditures and depreciation for the twelve months
ended September 30, 1997 amounted to $3.4 million and $4.4 million,
respectively.
The Feather River, California Utility & Construction Products facility
("Feather River") includes both a wood treating and now-dormant wood-fired
cogeneration facility. The Company has found it difficult to compete in the
California utility pole market due to Feather River's limited treatment
capabilities, a shrinking product demand and the high cost of raw materials.
The Company has recently been notified that a targeted customer for Feather
River will not take product in 1998, which will impact the forward-looking
profitability of this facility. The Company is currently conducting an
analysis to determine the feasibility of continuing to operate this facility;
this analysis is expected to be completed by the end of 1997. The current
carrying value of assets at this
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facility is approximately $4.3 million. The Feather River cogeneration
facility has been dormant for three years while the Company explored potential
opportunities for developing a treated wood burning and disposal facility. The
Company has been unable to locate a customer for this process, and expects to
make a decision regarding the future of the facility by the end of 1997. In
the event that a decision is made to close the cogeneration facility, this
could result in a charge to earnings in the fourth quarter of approximately
$1.9 million, which includes a $1.6 million early contract termination fee
with the local utility.
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BUSINESS
The Company is a leading integrated producer of carbon compounds and treated
wood products for use in a variety of markets including the chemical,
railroad, aluminum and steel industries. The "Koppers" name has been
associated with the carbon compounds and wood treating businesses for over 70
years and the Company has a leading position in most of its markets. The
Company operates 22 facilities in the United States and 14 in the South
Pacific (primarily in Australia and New Zealand), and maintains indirect
ownership interests in an additional facility in the United States through its
domestic joint venture KSA (as defined herein) and in five facilities overseas
through Tarconord. The Company recorded net sales and Adjusted EBITDA of
$717.6 million and $95.8 million, respectively, for the twelve months ended
September 30, 1997. For the same periods, the Company's businesses, Carbon
Materials & Chemicals, Railroad & Utility Products, Coke Products and Koppers
Australia, accounted for 34%, 35%, 14% and 17% of pro forma net sales,
respectively.
Through its Carbon Materials & Chemicals division, Koppers is the largest
coal tar processor in North America. Koppers' Carbon Materials & Chemicals
division processes coal tar into a variety of intermediate products, including
carbon pitch, PAA and creosote, which are basic materials necessary in the
production of aluminum, polyester resins and plasticizers, and the pressure
treatment of wood, respectively. Koppers' Railroad & Utility Products division
is the largest supplier of treated wood products, such as railroad crossties
and utility poles, to United States railroads and the electric and telephone
utility industries. Koppers' Coke Products division converts coal into coke
for sale to integrated steel producers and foundries that use coke in the
production of iron and steel.
Products and services provided by Koppers Australia are similar to those
provided by Koppers. Koppers Australia is Australia's largest manufacturer of
carbon pitch, wood preservatives and treated wood products and it markets
these products, as well as carbon black, in Australia, New Zealand and other
Pacific Rim nations. Koppers Australia is the only coal tar distiller in
Australia, providing it with a significant competitive advantage in serving
the Australian aluminum smelting industry.
BUSINESS STRATEGY
The Company's strategy includes: (i) improving productivity; (ii)
implementing additional cost reduction initiatives; (iii) developing,
marketing and selling new products; and (iv) broadening its customer base in
new and existing markets.
In the Carbon Material & Chemicals division, the Company is currently
developing improved pitches for the aluminum industry, specialty coal tar
pitches to be used in electrode carbon markets and additional downstream
applications for naphthalene in the super-plasticizer and other specialty
chemical markets. The Company's strategy in the railroad industry is to be the
largest volume supplier of high quality treated wood products, track
maintenance and construction products and services. The Company will continue
to review opportunities to increase capacity at several of its treating
facilities and to expand services offered to railroad customers, such as
plant-assembled track sections, freight car cleaning and used tie disposal. In
Australia, New Zealand and the Far East, the Company intends to expand its
access to coal tar feedstocks and soft pitches with a focus on China and other
emerging markets.
COMPETITIVE STRENGTHS
Strong Customer Relationships--The Company's reputation has enabled it to
include among its customers numerous companies preeminent in their respective
markets, including Alcoa, CSX, LTV and UCAR. In order to enhance these
relationships, the Company has in place programs to ensure quality and
customer satisfaction. In addition, the Company's facilities are strategically
located to service its customers' requirements.
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Broad Product Line--The Company sells a wide variety of products to a
diverse customer base, including steel producers, aluminum smelters,
railroads, utilities, rubber tire producers, wood treaters, producers of
polyester resins, paints, coatings and plasticizers, the roofing industry and
pavement sealer manufacturers. The Company's broad product line and customer
base allow it to reduce its exposure to any one market segment.
Long-Term Sales Contracts--Historically, the Company has sought to reduce
its exposure to the cyclicality of its customers' businesses and general
economic conditions by securing commitments for a large portion of its planned
production through annual and multi-year contracts. In each of the last five
years, the Company has been able to secure over 50% of the following year's
sales through such contracts.
Global Presence--The Company, along with its joint venture in Denmark,
Tarconord, serves the North American, European, Asian and Australian markets
with carbon materials and chemical products. The Company works closely with
Tarconord on marketing strategy, raw material sourcing and technology sharing.
The Company and Tarconord have completed several acquisitions and have entered
into marketing agreements enabling the Company to expand its presence into new
and emerging markets, including the United Kingdom, People's Republic of China
and other Pacific Rim nations.
Diversified Supply Base--The Company believes that its ability to source
high-quality coal tar, wood and coal from multiple suppliers provides it with
a significant competitive advantage in meeting customer requirements in a
timely and economically advantageous manner. In addition, the Company believes
its ability to source coal tar globally is critical to obtaining the quality
of coal tar needed to satisfy its global customers' needs.
Vertical Integration--The Company's ability to utilize, in its manufacturing
processes, products produced in its Carbon Materials & Chemicals and Coke
Products divisions provides the Company with significant cost savings. The
Company also believes it has a significant cost advantage over its competitors
as a result of its ability to use internally generated naphthalene as a
primary feedstock in the production of PAA. All of the Company's domestic
competitors currently use orthoxylene, which is generally a higher-cost
feedstock than naphthalene, in the production of PAA. Another example of
vertical integration is that creosote, a major by-product of the coal tar
distillation process, is used as a raw material in the treatment of wood by
the Company's Railroad & Utility Products division.
Tax Credits--The Monessen Facility qualifies for a tax credit based on its
production of coke as a non-conventional fuel source and the sale thereof to
unrelated third parties. The credit is available through December 31, 2002
and, based on current production levels at the Monessen Facility, could
provide up to $10.2 million of tax credits annually, unadjusted for inflation
and assuming full production at the Monessen Facility, until the credit
expires. Use of the tax credits is limited to the availability of taxable
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations." The Company may monetize all or
some portion of these tax credits.
INDUSTRY OVERVIEW
CARBON MATERIALS & CHEMICALS
The coal tar distillation business involves the conversion of coal tar, a
by-product of the transformation of coal into coke, into a variety of
intermediate chemical products in processes beginning with distillation.
During the distillation process, heat and vacuum are utilized to separate coal
tar into three primary components: carbon pitch (approximately 50%), creosote
oils (approximately 30%) and chemical oils (approximately 20%). The most
critical element in producing high quality tar products is the ability to
obtain and blend multiple coal tars, with various specifications, from several
sources in order to achieve the consistent properties desired by the customer.
The aluminum industry is the largest user of carbon pitch, which acts as a
binding material for the anodes used in the electrolysis process required in
aluminum smelting. Because all coal tar products are produced in
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relatively fixed proportion to carbon pitch, the level of carbon pitch
consumption generally determines the level of production of other coal tar
products. The commercial carbon industry, the second largest user of carbon
pitch, uses carbon pitch to produce electrodes and other specialty carbon
products for the steel industry. Management estimates that the United States
aluminum and specialty carbon markets consumed approximately 600,000 tons of
carbon pitch in 1996.
Creosote is used in the wood preservation industry as a preservative for
railroad crossties and lumber, utility poles and pilings. Approximately two-
thirds of the total United States market requirements are used for railroad
construction and maintenance, with the remainder used primarily for utility
poles and pilings. To the extent that creosote cannot be sold for use in
treating wood products, distillate oils are sold into the carbon black market
rather than being blended to creosote specifications. Management estimates
that the North American wood treating industry used approximately 620 million
pounds of creosote in 1996. The Carbon Materials & Chemicals division sold
approximately 283 million pounds of creosote in 1996, 34% of which was sold to
the Railroad & Utility Products division. An additional 36% of Koppers'
creosote production was sold to three Class 1 railroad customers, all of which
take delivery of the creosote at Koppers' wood treating facilities.
Chemical oils resulting from the distillation of coal tars are further
refined into naphthalene, which is the primary feedstock used by the Company
for the production of PAA. The primary markets for PAA are in the production
of flexible vinyl, polyester resin and alkyd resin. Roofing pitch and refined
tars are also produced in smaller quantities and are sold into the commercial
roofing and pavement sealer markets, respectively.
Because of the Clean Air Act Amendments and other Environmental Laws, future
coal tar availability from United States coke production is expected to
decline. Management believes that the Company's ability to source coal tar and
carbon pitch from overseas markets, as well as its research of petroleum
feedstocks, will assist in securing an uninterrupted supply of coal tar. See
"Risk Factors."
RAILROAD & UTILITY PRODUCTS
Railroad Products & Services
The major product of Railroad Products & Services is pressure-treated wood
crossties. Treated crossties are used in railroad track maintenance programs.
Approximately 15 million crossties are replaced by railroads every year.
United States Class 1 railroads (defined as the nine largest railroad systems
in the United States) maintain approximately 177,000 miles of track, estimated
to contain 540 million crossties. In addition to crossties, the division also
offers services to the railroads, such as assembling 39-foot track panel
sections, pre-plating ties, cleaning debris from cars, and disposing of
discarded ties in an environmentally safe manner.
Historically, investment trends in track maintenance by railroads have been
linked to general economic conditions in the country. During recessions, the
railroads have typically deferred track maintenance until economic conditions
improve. Demand has been relatively stable since 1993. Recently, several of
the major Class 1 railroads have merged. Management believes these mergers
will not have an adverse effect on the future demand for crossties.
Hardwoods, such as oak and other species, are the major raw materials in
wood crossties. Hardwood prices, which account for approximately 60% of a
finished tie's cost, fluctuate with the demand from competing hardwood lumber
markets, such as oak flooring, pallets and other specialty lumber products.
Normally, raw material price fluctuations are passed through to the customer
according to the terms of the applicable contract. Weather conditions can be a
factor in the supply of raw material, as unusually wet conditions may make it
difficult to harvest timber. Creosote, the preservative used to treat
crossties, accounts for approximately 10% of the finished tie's cost.
Hardwood lumber is procured by the division from hundreds of small sawmills
throughout the northeastern, midwestern, and southern areas of the country.
The ties are shipped via rail car or trucked directly to one of the
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division's thirteen treating plants, all of which are on line with a major
railroad. The ties are either air-stacked for a period of six to twelve months
or artificially dried by a process called boultonizing. Once dried, the ties
are pressure treated with creosote, a product of Koppers' Carbon Materials &
Chemicals division.
The Class 1 railroads have demonstrated a desire to outsource their non-core
business activities. This desire, coupled with Koppers' long-standing
relationships with the Class 1 railroads, has positioned the Company for a new
growth opportunity. The Company is now offering new services to the railroads
at a cost lower than the railroads' internal cost, and the Company believes
that there is an opportunity for future growth in such related areas.
Utility & Construction Products
The Utility & Construction Products division treats utility poles and timber
piling for sale to electric utilities, telephone companies and the
construction industry. These products are produced from pine or fir trees. The
trees are cut to length and shipped to peeling locations at one of the
Company's seven treating facilities or a third party's site. The poles are
then either dried in kilns or put directly into treating cylinders
(autoclaves) and steam conditioned before treatment. Kiln drying and steam
conditioning are processes that remove the water from the wood before
treatment. The applicable preservative is then injected into the wood under
pressure, after which a vacuum is used to remove any excess chemical.
Over the last two years, overall pole demand has dropped as utilities have
reduced non-essential spending in anticipation of competitive pressure arising
from deregulation. It is expected that deregulation will affect both new and
replacement pole installation markets for the next several years.
Pricing of raw materials has been significantly impacted over the last five
years due to a shortage of supply. Douglas fir availability has been affected
by logging restrictions on public land, resulting in increased demand for
southern yellow pine. According to Southern Pressure Treaters Association
statistics, pole prices have gone up over 65% during the last five years.
COKE PRODUCTS
Coke is a carbon and fuel source required in the manufacture of steel and
iron. Coal, the primary raw material, is carbonized in oxygen-free ovens to
obtain the finished product. Coke manufacturers are either an integrated part
of a steel company or, as in the case of the Company, operate independently
and are known as "merchant producers."
Coke is consumed in three markets: steel mill blast furnaces, foundries and
other industrial operations. There are two basic types of coke which are
produced: furnace coke and foundry coke. Furnace coke, which is produced from
different coal blends and requires different heating periods than foundry
coke, is generally formed in smaller pieces than foundry coke and is used in
blast furnaces to make steel by acting as a reducing agent for the iron ore.
Foundry coke generally has higher prices and is used predominantly by
automobile and pipe manufacturers in the metal-forming process. Imports are a
relatively small factor in the foundry coke market because of difficulties in
shipping and limited sources of high-quality imports, but imports of furnace
coke have become more significant over the past three years.
Coal is transformed into coke by a process beginning with the pulverizing,
blending and mixing of various types of coal to produce coke with the
appropriate chemical and physical specifications. The coal mixture is baked
approximately 18 hours for furnace coke and 28 hours for foundry coke at
temperatures reaching 2,000 degrees fahrenheit and is subsequently quenched
and screened in accordance with contract specifications before being loaded
for shipment. Volatile constituents, including gases, chemicals and coke-oven
tar, are extracted and sold for a variety of industrial uses, with a portion
of the gas being returned to the coking chambers as heating fuel.
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The quality of coke is determined by its chemical and physical properties. A
high percentage of fixed carbon and low levels of sulfur, ash, and other
volatile matter are essential to the effectiveness of coke in the iron and
steel manufacturing processes. The most important physical properties of coke
are its ability to withstand breakage and its resistance to abrasion during
handling and use in blast furnaces and foundries.
Domestic coke production capacity has decreased over the last ten years due
to high capital costs for coke oven maintenance and rebuilding, high operating
costs and expenditures resulting from new environmental compliance standards.
As a result of the decrease in coke industry capacity, industry operating rates
have improved significantly over the past decade and the Company believes most
domestic coke producers operated at or near their effective capacities in 1996.
Several of the large integrated steel companies have shut down or announced
plans to close their coke batteries, reducing domestic capacity. The reduction
of United States coke production capacity is expected to continue. Integrated
steel producers are employing various methods to displace a portion of the coke
use in steel production to reduce their reliance on existing suppliers and
decrease raw materials costs. In some cases, companies have been successful in
replacing a portion of their demand for coke with pulverized-coal-injection
technology.
MANUFACTURING PROCESSES
The Company's operations are, to a substantial extent, vertically integrated
and employ a variety of processes as illustrated in the following flow diagram:
[Diagram appears here]
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CARBON MATERIALS & CHEMICALS
The Company's Carbon Materials & Chemicals division manufactures three
principal products: carbon pitch, PAA and creosote. These products, used in
the production of aluminum, steel, flexible vinyl, polyester resins and the
treatment of wood, respectively, are produced through the distillation of coal
tar, a by-product of the transformation of coal into coke. The Company
believes that, together with Tarconord, it is one of the two largest producers
of carbon pitch in the world. The Carbon Materials & Chemicals division's
profitability is impacted by its cost to purchase coal tar in relation to its
prices realized for carbon pitch, creosote and PAA. The Company has five
operating facilities in the United States strategically located to provide
access to coal tar and to facilitate better service to its customers with a
consistent supply of high-quality products. For 1996, sales of carbon pitch,
PAA and creosote (to outside customers only) accounted for approximately 43%,
21% and 10% of the Carbon Materials & Chemicals division's net sales,
respectively. Other significant products include roofing pitches and related
products (11%), refined tar (4%), and other chemical and tar products (8%).
The Company believes it has a strategic advantage over its competitors based
on its ability to access coal tar from many United States and foreign
suppliers and subsequently blend such coal tars to produce carbon pitch with
the consistent quality important in manufacturing quality anodes for the
aluminum industry. The Company's four coal tar distillation facilities and one
carbon pitch melting facility give it the ability to offer customers multiple
sourcing and consistent supply of high quality products. In anticipation of
potential shutdowns of United States coke capacity, the Company has secured
coal tar supply through long-term contracts and acquisitions. The Company also
benefits from its ability to use a carbon pitch by-product, naphthalene, as a
low-cost feedstock for PAA production and from its ability to sell a large
portion of its creosote production internally to the Railroad & Utility
Products business.
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<PAGE>
The following flow diagram illustrates the manufacturing processes in the
Carbon Materials & Chemicals division and shows the approximate percentage
yield for each gallon of coal tar distilled:
[Diagram appears here]
Koppers' sales volume of carbon pitch increased from 263,000 tons in 1993 to
364,000 tons in 1996, an increase of 38% due to improved aluminum market
conditions and the acquisition of the Clairton facility in April 1996. Overall,
pricing has trended moderately upward from 1993 through September 30, 1997.
Over 75% of Koppers' carbon pitch is sold to the aluminum industry under long-
term contracts ranging from three to seven years. Demand for carbon pitch has
fluctuated historically with United States' production of primary aluminum.
There are currently no known viable substitutes for carbon pitch in the
production of carbon anodes. The Carbon Materials & Chemicals division's two
largest customers represented approximately 20% of the division's net sales for
1996. The Company's three main competitors in North America in the production
of carbon pitch are AlliedSignal, Inc., VFT Canada, and Reilly Industries, Inc.
On a worldwide basis, naphthalene and orthoxylene, a petroleum derivative,
can both be used in the manufacturing of PAA and are considered to be
interchangeable. In the United States, however, the Company is the only PAA
producer capable of utilizing both orthoxylene and naphthalene in its
manufacturing process, with naphthalene being a generally lower cost feedstock.
Koppers' price realizations and profit margins for PAA have
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<PAGE>
historically fluctuated with the price of orthoxylene and its relationship to
Koppers' cost to produce naphthalene. Although the price of orthoxylene was
relatively stable prior to 1994, due to increased demand, the price of
orthoxylene increased from $0.14 per pound in March 1994 to $0.38 per pound in
May 1995. As a result, PAA prices increased by approximately 101% during that
period, providing Koppers with a significant cost advantage over its
competition and a temporary expansion of margins. In 1996, however, the
average price for orthoxylene declined to approximately $0.16 per pound,
resulting in a corresponding decline in PAA prices and margins. At September
30, 1997, orthoxylene prices were $0.19 per pound. Koppers' cost to produce
naphthalene and PAA is primarily driven by its cost to procure coal tar.
Koppers' four principal PAA competitors, Exxon Chemical Company, Aristech,
BASF Corporation and Stepan Company, can use only orthoxylene in the
production of PAA.
Approximately 34% of Koppers' creosote production is sold to the Railroad &
Utility Products division. An additional 30% is sold to three Class 1 railroad
customers, all of which take delivery of the creosote at one of Koppers' wood
treating facilities. Over the last eight years, the Railroad & Utility
Products division purchased all of its requirements of creosote from the
Carbon Materials & Chemicals division, providing it with a competitive
advantage. Koppers is the only competitor in this market that is integrated in
this fashion. The remainder of its creosote materials are sold to railroads,
to other wood treaters or into the carbon black market as a component in the
manufacture of rubber tires. Principal competitors in the creosote market are
AlliedSignal, Inc. and Reilly Industries, Inc.
Coal tar is purchased from a number of outside sources as well as Koppers'
Woodward Coke Facility and Monessen Facility. Primary suppliers are Bethlehem
Steel Corporation, LTV, USX Corporation and Wheeling-Pittsburgh Steel
Corporation. The Woodward Coke Facility currently provides approximately 3% of
Koppers' coal tar, and the Monessen Facility provides approximately 2%. On an
annual basis, Koppers distills approximately 150 million gallons of coal tar
representing approximately 76% of designed capacity. Other Carbon Materials &
Chemicals products include roofing pitch, used in the construction of built-up
roofing systems, and refined tars, sold to manufacturers of pavement sealers
for driveways and parking lots.
Koppers Australia and Tarconord are major regional producers of carbon pitch
and related products and are strategically important to the Company because
they enable the Company to access global markets for its carbon pitch and
related products.
RAILROAD & UTILITY PRODUCTS
The Company believes it is the largest supplier of treated wood crossties
and poles in the world. The Company markets these products almost exclusively
to the railroad and public utility markets, primarily in the United States and
Australia. The Railroad & Utility Products division's profitability is
primarily influenced by the demand for railroad products and services by Class
1 railroads, demand for transmission and distribution poles by electric
utilities and its cost to procure wood. Historically, sales of railroad
products and services have represented approximately two-thirds of the
Railroad & Utility Products division's net sales. Railroad products include
items such as crossties, switch ties and various types of lumber used for
railroad bridges and crossings. Utility products include transmission and
distribution poles for electric and telephone utilities and pilings used in
industrial foundations, beach housing, docks and piers. The Railroad & Utility
Products division operates 15 wood treating plants and 13 pole distribution
yards located throughout the United States, and the Company also has one used
crosstie burning cogeneration plant. The Company's network of plants is
strategically located near timber supplies to enable it to access raw
materials and service customers effectively. In addition, Koppers' crosstie
treating plants abut railroad customers' track lines, and its pole
distribution yards are located near Koppers' utility customers in the
northeast and midwest regions of the United States.
Railroad Products & Services
The Railroad Products & Services business supplies treated crossties and
other products and services to the United States railroad industry. Koppers
has an estimated 47% share of the United States market for treated wood
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products sold to the railroad industry. The Railroad Products & Services
division's largest customer base is the Class 1 railroad market which buys 84%
of all crossties produced in the United States. Koppers is also expanding key
relationships with the approximately 500 short-line and regional rail lines.
The railroad crosstie market is a mature market with approximately 15.2
million replacement crossties purchased per year. The demand for crossties is
only partially affected by economic conditions and has been relatively stable
since 1993. In 1996, Koppers treated approximately 6.3 million crossties for
its Class 1 railroad customers. The Company currently has contracts with eight
of the nine United States Class 1 railroads and has enjoyed long-standing
relationships, some of more than 50 years, with this important customer base.
These relationships, coupled with a growing interest on the part of railroads
to outsource non-core activities, have enabled the Company to position itself
for growth by offering new services to railroads at a cost lower than the
railroads' internal cost. Such new services include assembling 39-foot track
sections and affixing fastening devices at the treating plant rather than
field locations; removing debris from railroad freight cars; and disposing of
discarded ties in an environmentally safe manner in high temperature boilers.
In 1996, approximately 8% of Railroad Products & Services' net sales were
derived from these types of services to railroads. The Company intends to
capitalize on its relationships with railroads by expanding its current
service offerings, including track panels, car cleaning and railroad tie
disposal that fit with its strategic plan.
Koppers' top-10 railroad accounts, which comprised approximately 53% of
Railroad & Utility Products net sales for 1996, are serviced through long-term
contracts ranging from one to twelve years on a requirements basis. CSX
accounted for 15% of Railroad & Utility Products net sales for 1996 and has a
five-year treating agreement with the Company, expiring in December 2001,
which calls for a minimum treating volume of 1.8 million crossties annually.
Koppers' sales to the railroad industry are coordinated through its office in
Pittsburgh, Pennsylvania. The Company's principal competitor in the railroad
products market is Kerr-McGee Chemical Corp.
Hardwood lumber accounts for approximately 60% of a finished crosstie's
cost. The Company obtains its hardwood supply from hundreds of small sawmills
throughout the northeastern, midwestern and southern areas of the United
States. Hardwood prices fluctuate with demand from competing hardwood lumber
markets such as flooring and pallets. In 1993, the price of hardwood increased
significantly, which resulted in a temporary reduction of the Company's
margins. The wood is taken by either truck or rail from Company-operated
collection points directly into its treating plants, where it is pressure
treated with creosote, a product of the Carbon Materials & Chemicals division.
Over the last eight years, the Railroad & Utility Products division purchased
all of its creosote requirements from the Carbon Materials & Chemicals
division. In addition, several railroads procure their own raw materials and
ship them into the Company's plants for treating services. Historically, over
three-fourths of the Company's net sales to railroads have been based on
annual or multi-year contracts.
The Company believes that the threat of substitution for the wood crosstie
is low due to the higher cost of alternative materials. Concrete ties,
however, have been identified by the railroads as a feasible alternative to
wood crossties in limited circumstances. In 1991, the Company acquired a 50%
partnership interest in KSA, a concrete crosstie manufacturing facility in
Portsmouth, Ohio, in order to take advantage of this growth opportunity. In
1996, an estimated 1.1 million concrete crossties, or 7% of total tie
insertions, were installed by Class 1 railroads. The Company believes that
concrete ties will continue to command approximately this level of market
share. This facility produced approximately 150,000 concrete crossties in
1996, or 12% of the U.S. estimated concrete tie market. While the cost of
material and installation of a concrete tie is much higher than that of a wood
tie, the average life of wood and concrete ties are similar, although concrete
generally performs better in high weight bearing, high traffic areas and is
attractive to railroads for these purposes.
Utility & Construction Products
Koppers believes it is the largest domestic producer of treated wood pole
products. The Company's strategy is to maintain its position as the industry
leader in the supply of utility poles, offering the highest quality products
and services, while continuing to cut costs.
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<PAGE>
Utility poles are produced mainly from softwoods such as pine and fir, which
have been subject to steady price increases in recent years due primarily to
increased demand for softwood materials in the paper and construction
industries. The majority of the softwood used for poles is purchased from
large timber owners and individual landowners and shipped to one of the
Company's pole-peeling facilities. While crossties are treated exclusively
with creosote, the Company treats poles with a variety of preservatives
including pentachlorophenol ("Penta"), chromated copper arsenate ("CCA") and
creosote.
The market for utility pole products is characterized by a large number of
smaller, highly competitive producers selling into a price-sensitive industry.
The utility pole market is highly fragmented with over 300 investor-owned
electric and telephone utilities and 1,800 smaller local utilities and Rural
Electric Associations ("REAs"). Approximately 2.4 million poles are purchased
annually. In 1996 and 1997, the Company has seen its utility pole volumes
decrease due to industry deregulation and its impact on maintenance programs.
The Company expects demand for utility poles to remain at lower levels for the
next several years.
In 1996, pole products accounted for approximately 31% of Railroad & Utility
Products net sales. Koppers' sales to its ten largest pole customers accounted
for approximately 8% of Railroad & Utility Products net sales for 1996.
Principal competitors in the utility products market are McFarland Cascade,
North Pacific Lumber and Atlantic Wood Industries Inc. There are few barriers
to entry in the utility products market, estimated by the Company to consist
of mostly regional, wood treating companies which typically operate small to
medium size plants and serve local clients.
COKE PRODUCTS
The Company operates the Woodward Coke Facility and the Monessen Facility,
which have an aggregate annual coking capacity of approximately 800,000 tons.
For 1996, furnace coke comprised approximately 78% of total Coke Products net
sales, foundry coke 9%, other coke 8%, and by-products the remaining 5%.
The Company's Woodward Coke Facility produces furnace and foundry coke as
well as coal tar and other related chemicals. The Woodward Coke Facility
consists of 138 ovens arranged in three batteries and has an annual production
capacity of approximately 450,000 tons. All ovens have a capacity of
approximately eleven to twelve tons of coal per charge. One hundred of the
ovens were built in 1979 and 38 in 1970.
Due to the advanced ages of the coke oven batteries, ongoing environmental
compliance issues and significant capital expenditure requirements, all of
which have combined to reduce productive capacity and increase per unit costs,
the Company's Board of Directors has authorized the Company to close the
Woodward Coke Facility in early 1998. This will result in a charge to earnings
in the fourth quarter of 1997 of approximately $38.5 million, $9.4 million of
which will be cash charges primarily for dismantling and severance costs.
Sales and gross profit at the Woodward Coke Facility for the twelve months
ended September 30, 1997 amounted to $58.1 million and ($6.1) million,
respectively. Capital expenditures and depreciation for the twelve months
ended September 30, 1997 amounted to $3.4 million and $4.4 million,
respectively.
Koppers has made capital expenditures of approximately $25 million to
modernize the Monessen Facility since its purchase in 1995 for $5.0 million.
The Monessen Facility was restarted in late 1995 and reached full production
in April 1996. The plant consists of two batteries with a total of 56 ovens
and has a total capacity of approximately 350,000 tons of coke per year. All
of the ovens were rebuilt in 1980 and 1981, which, together with recent
improvements, makes the Monessen Facility one of the most modern coking
facilities in the United States. The Monessen Facility is self-sufficient in
all its energy needs other than electricity. The Monessen Facility qualifies
for a tax credit based on its production of coke as a non-conventional fuel
and the sale thereof to unrelated third parties. The tax credit generated per
ton of coke is tied to a per-barrel of oil equivalent
55
<PAGE>
determined on a BTU basis and adjusted annually for inflation. In 1996, the
approximate value of this tax credit per ton of coke was $26.00. The credit is
available through December 31, 2002 and provided a tax benefit to Koppers of
approximately $7.0 million in 1996 and could provide up to $10.2 million per
year thereafter, unadjusted for inflation and assuming the availability of
taxable income and full production at the Monessen Facility. The Company may
monetize some or all of these tax credits. The spot market price for furnace
coke at September 30, 1997 was $107.00 per ton.
Koppers has a contract with LTV covering production at the Monessen
Facility. The contract is a seven-year contract through 2002 and is for
240,000 tons per year, plus or minus 10% at LTV's option, at prices subject to
periodic adjustments. In 1998, the Company expects LTV to take close to 100%
of the Monessen Facility's production capacity.
Due to unanticipated disruptions in United States coke consumption during
1996, along with the increasing availability of lower-priced imported coke,
the current market for coke remains relatively soft, and management believes
that currently there are significant excess inventories of coke in the United
States. In the future, the Company anticipates that additional domestic coking
facilities, including portions of its own facilities, may be idled due to the
costs associated with more stringent environmental compliance standards.
KOPPERS AUSTRALIA
Koppers Australia is a wholly owned subsidiary of the Company and is
Australia's largest manufacturer of carbon pitch, wood preservatives and
treated wood products, and markets these products, as well as carbon black, in
Australia, New Zealand and other Pacific Rim nations. Koppers Australia is the
only coal tar distiller in Australia, providing it with a significant
competitive advantage in serving the Australian aluminum smelting industry.
Products and services provided by Koppers Australia's coal tar division are
similar to those provided by the Company's Carbon Materials & Chemicals
division, with the exception that Koppers Australia does not have PAA
production capabilities (see "Business--Carbon Materials & Chemicals").
Operations in coal tar processing, chemically treated wood products, and
carbon black together accounted for 36%, 20% and 21% of Koppers Australia's
net sales respectively, in 1996. Koppers Australia also has a 51% interest in
a wood preservative chemicals company, Koppers-Hickson, which accounts for the
remaining 23% of net sales. Koppers Australia has operations in seven
countries, enjoys sizable market shares in each of its businesses and is well-
positioned to take advantage of anticipated growth in the aluminum industries
in Australia, China and Southeast Asia. Koppers Australia has entered into a
marketing agreement with a carbon pitch producer located in the People's
Republic of China to export carbon pitch from China to world markets. The wood
preservation operations of Koppers Australia are generally pole-related and
are similar to those of the Company's Railroad & Utility Products division.
Koppers Australia is the Australian pole market leader, with an estimated 50%
market share.
In 1995, Koppers Australia purchased the remaining 49% of Continental Carbon
Australia Pty. Ltd., a major Australian carbon black producer, making it a
wholly-owned entity and thus allowing Koppers Australia to take full advantage
of significant growth potential in the Asian carbon black market. Koppers-
Hickson has exclusive rights to marketing, production and distribution of wood
preservatives (primarily copper chrome arsenate) developed by Hickson
International PLC throughout the Australian, South Pacific and East Asian
regions.
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<PAGE>
Historical operating results for Koppers Australia for the past three fiscal
years are as follows (based on average month-end rates for income statement
items and end of period rates for balance sheet items):
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDING JUNE 30, ENDED SEPTEMBER 30,
(U.S. DOLLARS IN MILLIONS) ----------------------------- -------------------
1995 1996 1997 1996 1997
--------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenue........... $ 116.5 $ 132.6 $ 134.0 $ 102.5 $ 87.8
Operating profit............ 16.8 22.3 22.1 16.3 12.9
Net income.................. 10.7 14.3 14.8 9.5 6.2
Minority interest included
in net income............... 2.2 2.1 1.5 1.1 1.0
EBITDA...................... 23.4 29.2 29.7 22.9 19.0
Current assets.............. 46.1 47.9 53.2 62.4 60.5
Total assets................ 105.2 113.9 127.0 127.1 125.4
Current liabilities......... 19.7 22.8 22.0 24.5 19.1
Total liabilities........... 33.5 35.7 35.1 37.7 31.2
</TABLE>
EQUITY INVESTMENTS AND RELATED PARTIES
Tarconord
Tarconord, located in Nyborg, Denmark, produces and markets carbon pitch,
naphthalene and related products for the European and Middle Eastern markets.
The Company's 50% partner in Tarconord is Tarco A/S, a road paving and
industrial piping company also located in Denmark. Tarconord's strategy is to
grow through acquisitions as opportunities arise, expand access to secure
long-term coal tar supplies, and gain additional market share.
Tarconord markets its primary product, carbon pitch, to aluminum producers
in Norway, the Netherlands, the states of the former Soviet Union and northern
Germany. Coal tar supplies are primarily purchased from steel producers in
Scandinavia, Poland, the states of the former Soviet Union and Germany.
Tarconord has a strategic location with respect to its largest customer
country, Norway, where liquid pitch shipments move directly by ship from
Tarconord's tar distillation facility at Nyborg to Norwegian smelters located
at deep water sites.
Tarconord helps to position the Company as not only one of the two largest
carbon pitch suppliers in the world, but also as the only such supplier
operating on four continents. Management believes that this global presence
represents a significant competitive advantage in serving multinational and
domestic aluminum manufacturers.
The Company and Tarconord form what has informally and collectively come to
be known as the "Koppers Group" in the world-wide business of tar distillation
and in the production of carbon pitch and accompanying by-products. The
Koppers Group meets regularly and cooperates actively in the sharing of
technology and operating experience, reviewing research and development
projects, sourcing raw materials and determining marketing strategy. The
Company believes that, together with Tarconord, it has a 21% world market
share in carbon pitch, excluding the People's Republic of China and the states
of the former Soviet Union and Eastern Europe (for which data is not
available).
On August 2, 1996, Tarconord acquired 100% of the capital stock of Bitmac, a
United Kingdom company engaged in tar distillation which has had long-term
access to the coal tar generated by British Steel Corporation. Bitmac operates
four plants in the United Kingdom and its sales for its fiscal year ended
March 31, 1996 were approximately $60 million. The Company believes that this
acquisition will more than double Tarconord's capacity and sales and
strengthen its strategic position as a supplier to European aluminum smelters.
Domestic Joint Venture: KSA
KSA Limited Partnership ("KSA"), located in Portsmouth, Ohio, produces
concrete crossties, a complementary product to the Company's treated wood
crosstie business.
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Other interests are held by Sherman International Corp. (24%), Abetong
America, Inc. (24%) and Sherman Abetong, Inc. (2%). KSA was formed to
construct, own and operate a concrete railroad crosstie manufacturing facility
located in Portsmouth, Ohio. KSA's major customer is CSX, which has a contract
with the joint venture for 1.0 million concrete ties, approximately 0.75
million of which have been supplied since the start-up of operations in 1992.
It has also expanded its product offerings to include concrete turnouts, used
in rail traffic switching, and used crosstie rehabilitation.
The following table presents total sales, equity in earnings and dividends
received with respect to each of the Company's joint ventures for fiscal years
ended 1994, 1995 and 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
TARCONORD
Total sales.......................................... $45,778 $72,419 $118,178
Equity in earnings................................... 738 3,139 1,577
Dividends received................................... 562 731 2,430
EBITDA............................................... 6,448 14,393 10,328
KSA
Total sales.......................................... $11,249 $14,751 $ 15,613
Equity in earnings................................... 962 1,102 1,470
Dividends received................................... 500 1,500 1,000
EBITDA............................................... 2,777 3,279 4,457
</TABLE>
RESEARCH AND DEVELOPMENT
As of September 30, 1997, the Company had ten full-time employees engaged in
research and development and technical service activities. The Company's
research efforts are directed toward further development and utilization of
products and technology regarding products developed from coal tar and
technical service efforts to promote further use of creosote. The Company
believes the research and technical efforts currently expended in these areas
are adequate to maintain a leadership position in the technology related to
these products. Expenditures for research and development for fiscal 1994,
1995 and 1996 were $0.9 million, $0.9 million and $1.0 million, respectively.
TECHNOLOGY AND LICENSING
In 1988, Koppers acquired certain assets from Old Koppers including the
patents, patent applications, trademarks, copyrights, transferable licenses,
inventories, trade secrets, and proprietary processes used in the businesses
acquired. The most important trademark acquired was the name "Koppers." The
association of the name with the chemical, building, wood preservation and
coke industries is beneficial to the Company, as it represents longstanding,
high-quality products. Included in the patents that were acquired by Koppers
were patents for refuse burners, pitch quality controls (both in tar plants
and aluminum plants), wood preservatives and additives, and tar refining.
ENVIRONMENTAL MATTERS
Like companies involved in similar environmentally sensitive businesses, the
Company's operations and properties are subject to extensive Environmental
Laws. The Clean Air Act and Clean Water Act, each as amended, impose stringent
standards on air emissions and water discharges, respectively. Under RCRA, a
facility that treats, stores or disposes of hazardous waste on-site may be
liable for corrective action costs, and a facility that holds a RCRA permit
may have to incur costs relating to the closure of certain "hazardous" or
"solid" waste management units. Under CERCLA and similar state laws, an owner
or operator of property at which
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releases of hazardous substances have occurred may be liable for investigation
and remediation of any resulting contamination and related natural resource
damages. In addition, under CERCLA, the generator of hazardous substances may
be strictly, and jointly and severally liable for any required investigation
or remediation at third-party disposal sites and related natural resource
damages. The Environmental Laws are subject to frequent amendment. The
sanction for failure to comply with such Environmental Laws can include
significant civil penalties, criminal penalties, injunctive relief and denial
or loss of, or imposition of significant restrictions on, environmental
permits. In addition, the Company could be subject to suit by third parties in
connection with violations of or liability under Environmental Laws.
Jefferson County issued a notice of violation in March 1996 in connection
with various alleged violations of Jefferson County's air pollution control
regulations for emissions from coke oven batteries at Koppers' Woodward Coke
Facility during the period May 26, 1992 through March 1, 1996. On February 14,
1997, the US-EPA issued a notice of violation covering the same issues as were
raised in the Jefferson County notice of violation. Thereafter, Koppers
discovered that certain benzene abatement equipment at the its Woodward Coke
Facility had not been operational for several months. Following a preliminary
investigation, Koppers also discovered that certain environmental reports and
records contained incomplete and inaccurate information and that certain
environmental reports and certifications were not filed when required. Koppers
has notified Jefferson County, the State of Alabama and the US-EPA of these
irregularities, and the environmental reporting status of the Woodward Coke
Facility has been brought up to date by Koppers. Counsel and independent
investigators have been retained to conduct a complete and thorough
investigation. While the benzene abatement equipment has been returned to
service, Koppers could be subject to significant liability in connection with
these matters, including civil and criminal penalties and the risk of third-
party lawsuits. Koppers and Jefferson County have negotiated a settlement
agreement, pursuant to which Koppers might be required to install monitoring
and control equipment and institute operational changes. In addition, Koppers
has permanently shut down Batteries 4A, 4B and 5 at the Woodward Coke
Facility. The settlement agreement includes both the original Jefferson County
notice of violation and the self-reported benzene abatement violations. The
settlement agreement, in addition to the items listed above, also required
Koppers to pay a civil penalty in the amount of $450,000 to Jefferson County,
which sum has been paid. There can be no assurance that the settlement with
Jefferson County will deter the US-EPA from pursuing its notice of violation
and that the US-EPA will not seek additional actions or penalties that could
have a material adverse effect on the business, financial condition, cash flow
and results of operations of the Company.
During the investigation of the Woodward Coke Facility described above, it
was also discovered that certain environmental records and reports relating to
discharges of treated process water and treated storm water contained
incomplete and inaccurate information. Corrected reports have been submitted
to the State of Alabama and the US-EPA. While no notice of violation has been
issued in conjunction with this issue, it is believed likely that a notice of
violation will be issued and substantial penalties may be sought by the State
of Alabama or the US-EPA.
Koppers was served with a notice of violation from Pa-DEP, which alleged
Koppers was not in compliance with a plan approval issued by Pa-DEP for the
Monessen Facility. The notice alleges that the Monessen Facility is emitting
more nitrogen oxides than is allowed by the plan approval. Koppers also
received a notice of violation in connection with a failure to conduct timely
emission testing on the boilers at the Monessen Facility. Koppers has
installed additional equipment and modified existing equipment to improve the
quality of boiler emissions. Resolution of these matters could have a material
adverse effect on the business, financial condition, cash flow and results of
operations of the Company. Koppers has submitted an amended plan approval
application to Pa-DEP that provides for limitations on the operation of the
two boilers at the Monessen Facility. Pa-DEP is currently reviewing this
application. As a result of the failure to meet the original nitrogen oxide
emission limitations, it is expected that Pa-DEP will propose a civil penalty
in an amount of approximately $100,000. However, there can be no assurance
that a higher penalty will not be sought.
On June 12, 1996, Pa-DEP issued a notice of violation in connection with an
alleged noncompliance with the terms of a consent agreement between Koppers
and Pa-DEP regarding liability for environmental conditions
59
<PAGE>
existing at the time Koppers purchased the Monessen Facility ("Consent
Agreement"). The notice of violation alleged that Koppers had not implemented
the corrective actions required under the Consent Agreement in a timely
fashion. Pa-DEP has calculated that a stipulated penalty in the amount of
$261,000 may be requested under the Consent Agreement for the alleged untimely
actions. Koppers has completed the implementation of the corrective actions at
issue and is in the process of conducting settlement negotiations with Pa-DEP
to agree upon the amount of the stipulated penalty to be assessed in
connection with this matter.
In June 1997, during a routine environmental compliance audit of the
Logansport Wood Treating Facility, it was discovered that certain records and
reports relating to discharges of treated process water contained incomplete
and inaccurate information. Corrected reports have been submitted to the local
municipality, the State of Louisiana and the US-EPA. While no notice of
violation has been issued in conjunction with this issue, it is likely that a
notice of violation will be issued and substantial penalties will be sought by
the local municipality, the State of Louisiana or the US-EPA.
For each of the last three fiscal years, the Company's average capital
expenditures and operating expenses for environmental matters, including
depreciation, amounted to approximately $7.0 million and $16.0 million,
respectively. The Company believes that environmental operating costs will not
change materially from those incurred during the past three years. The Company
currently estimates that capital expenditures in connection with matters
relating to environmental control will be approximately $3.8 million and $6.9
million for 1997 and 1998, respectively. Because Environmental Laws have
historically become increasingly more stringent, costs and expenses relating
to environmental control and compliance may increase in the future. Also,
Koppers may have to incur additional capital expenditures and compliance costs
(which it is unable to estimate at this time) in connection with the
resolution of the aforementioned notices of violations. As such, there can be
no assurance that costs of compliance with existing and future Environmental
Laws will not exceed current estimates and will not have a material adverse
effect on the business, financial condition, cash flow and results of
operations of the Company.
Under the terms of the Asset Purchase Agreement between Koppers and Old
Koppers (now known as Beazer East, Inc.) at the formation of Koppers in 1988,
Beazer East assumed the liability for and indemnified Koppers against (among
other things) cleanup liabilities for contamination occurring prior to the
purchase date at sites acquired from Beazer East, and third-party claims
arising from such contamination under the Indemnity. Beazer East's performance
of the Indemnity is unconditionally guaranteed by Beazer Limited under the
Beazer Guarantee. The obligations of Beazer Limited under the Beazer Guarantee
may be enforced directly against Beazer Limited without notice of default to
Beazer East and without making any demand on, obtaining any judgment or order
or commencing any legal proceeding against, or taking any other action against
Beazer East. However, if such indemnification was not available for any
reason, including the inability of Beazer East and/or Beazer Limited to make
such indemnification payments, and if Koppers were required to pay such costs,
it could have a material adverse effect on the business, financial condition,
cash flow and results of operations of the Company. Furthermore, if Koppers
were required to record a contingent liability in respect of environmental
matters covered by the Indemnity on its balance sheets, the result could be
that Koppers would have significant negative net worth.
Five of the sites owned and/or operated by Koppers are listed on the
National Priorities List ("NPL") promulgated under CERCLA. These sites are the
Feather River Wood Treating Facility, Gainesville Wood Treating Facility,
Galesburg Wood Treating Facility, Florence Wood Treating Facility, and
Follansbee Tar Facility. In addition, many of Koppers' sites are or have been
operated under RCRA permits, and RCRA remedial and closure activities are
being conducted on several such sites. Currently, at the properties acquired
from Beazer East (which include all of the NPL sites and all but one of the
RCRA-permitted sites), substantially all investigative, cleanup and closure
activities are being conducted and paid for by Beazer East pursuant to the
terms of the Indemnity. The Indemnity provides that, with certain limited
exceptions, Beazer East will be responsible for and will indemnify Koppers
against any liability, damage, loss, cost, expense and any related fine or
penalty, including liabilities for personal injury to employees resulting from
exposure to toxic or hazardous substances, arising under any federal, state or
local Environmental Law in connection with any
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<PAGE>
condition or activity at the sites purchased or leased in connection with the
acquisition from Beazer East existing on or prior to the Asset Closing,
provided that, within twelve years after the Asset Closing (December 29, 2000)
Beazer East either receives a claim asserted by Koppers or a third party or
receives specific and particularized notice of a condition or activity that
may give rise to a claim and such a claim is at any time actually brought.
However, claims related to hazardous substances that were both generated at
facilities owned or operated prior to the Asset Closing and disposed of at
third-party locations before the date of the Asset Closing do not have to be
asserted or identified before the twelfth anniversary. Also, Beazer East
indemnifies Koppers for ninety percent (90%) of claims in excess of $100,000
in any year that are related to disposal of contaminated soil generated as a
result of a voluntary decision by Koppers. In regard to personal injury
environmental claims asserted by an employee alleging exposure to toxic
substances in the workplace, such claims are allocated between Beazer East and
Koppers according to how many months the employee making the claim worked for
each entity.
Costs and liabilities associated with investigative, cleanup and closure
activities at the NPL sites and RCRA-permitted facilities acquired from Beazer
East are expected to be significant. While Beazer East has retained and
accepted responsibility for investigative, cleanup and closure activities
relating to pre-Asset Closing contamination at such properties (including
being the signatory on several consent agreements relating to such sites) and
has paid, to date, for substantially all such investigative, remedial and
closure costs, the government has the right under applicable Environmental
Laws to seek relief directly from Koppers for any and all such pre-Asset
Closing obligations and liabilities at or on sites owned or operated by
Koppers. Although Beazer East and Beazer Limited have performed their
respective obligations since 1989, there can be no assurances that Beazer East
and Beazer Limited will continue to meet their obligations under the Indemnity
and the Beazer Guarantee, respectively. Since 1991, Beazer East and Beazer
Limited have been wholly-owned indirect subsidiaries of Hanson PLC. Hanson PLC
recently reorganized by spinning-off its chemicals, tobacco and energy
subsidiaries. However, Koppers has not received information indicating that
this spin-off will adversely affect the ability of Beazer East and Beazer
Limited to meet their obligations under the Indemnity and the Beazer
Guarantee, respectively.
Beazer East is actively fulfilling its obligations to conduct investigative,
cleanup and closure programs at the properties which Koppers acquired from
Beazer East in accordance with the requirements of regulatory authorities. The
Indemnity is not applicable to sites acquired since the formation of Koppers,
for which separate indemnifications have been negotiated where appropriate.
Beazer East and Beazer Limited are indirect subsidiaries of Hanson PLC. The
largest and smallest group in which the result of these companies are
consolidated is that headed by Hanson PLC. Beazer East is an operating company
which had revenues of approximately $600 million for each of the last three
fiscal years ended September 28, 1996 and had total assets of $1.7 billion as
of September 28, 1996. The Beazer East unaudited consolidated balance sheet at
September 28, 1996 reflects negative net worth of $64 million (including an
intercompany liability of $1.4 billion). This negative net worth is in large
measure the result of the adoption of SFAS 121, which resulted in pre-tax
charges for asset write-downs of $4.4 billion during fiscal year 1996.
Furthermore, Beazer East had a negative cash flow from operations in the
fiscal year ended September 28, 1996 and required funding from other Hanson
subsidiaries to meet its obligations. According to the Directors' Report and
draft accounts for the year ended September 30, 1996, Beazer Limited is a
holding company. While the unaudited balance sheet of September 30, 1996
expects to show a negative shareholder funds balance of (Pounds)10.4mn, the
accounts are prepared under the going concern concept because a fellow
subsidiary undertaking provides financial support to enable Beazer Limited to
meet its liabilities as they fall due. The Company has been informed that
Beazer East and Beazer Limited will remain wholly-owned indirect subsidiaries
of Hanson PLC. Management believes that Beazer East and Beazer Limited will
continue to fulfill their obligations as they have for the last eight years.
In the event that Beazer East and Beazer Limited do not continue to fulfill
their commitments under the Indemnity and the Beazer Guarantee, Koppers may be
required to pay costs covered by the Indemnity.
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<PAGE>
Koppers has been informed by Beazer East that for the last three years,
amounts paid by Beazer East under the Indemnity have averaged approximately
$13.0 million per year. The requirement to pay such costs without
reimbursement would have a material adverse effect on the business, financial
condition, cash flow and results of operations of the Company. Furthermore, if
Koppers were required to record a contingent liability regarding environmental
matters covered by the Indemnity on its balance sheets, the result could be
that Koppers would have significant negative net worth.
In addition, Beazer East has defended and is presently defending certain
toxic tort actions arising from the pre-Asset Closing operation of assets
which the Company acquired from Beazer East. These tort actions were not
assumed by Koppers under the Asset Purchase Agreement and are within the scope
of the Indemnity.
As a result of a lawsuit among CSX, Beazer East and the Company, CSX has
assumed Beazer East's obligations under the Indemnity in connection with
Koppers' facility located in Green Spring, West Virginia. There can be no
assurance that CSX will perform its obligations and if Koppers were required
to pay such costs, it could have a material adverse effect on the business,
financial condition, cash flow and results of operations of the Company.
The Indemnity does not afford Koppers indemnification against environmental
costs and liabilities relating to activities or conditions occurring or
arising after the Asset Closing, nor does the Indemnity cover liabilities
arising in connection with post-Asset Closing acquisitions.
In the summer of 1997, Koppers evaluated the environmental liabilities
related to the manufacturing sites associated with the Asset Closing. The
evaluation was based on a report prepared by an independent consultant, which
utilized site-specific public information to the extent available, as
supplemented by (among other things) its technical knowledge and expertise,
published resources regarding costing of remediation techniques and specified
technical cost and regulatory assumptions. The evaluation and report estimated
that approximately $111.1 million would be expended at these sites for
environmental remediation during the period of 1998 to 2042. Koppers estimates
that approximately $92.9 million of this amount is covered under the
Indemnity, that it is responsible for $135,000, and that identified third
parties are responsible for the remaining $18.1 million. There can be no
assurance, however, that the actual liabilities associated with the
investigation, cleanup and closure of these sites will not exceed this
estimate. The factors that could affect the continuing validity of the
estimate include: new information about the contamination at the sites that is
contrary to previous assumptions, new interpretations of existing
Environmental Laws, new and more stringent Environmental Laws, and more
vigorous enforcement policies of regulatory authorities. Further, in the event
that Beazer East does not fulfill it commitments under the Indemnity or the
identified third parties do not fulfill their commitments, Koppers may be
required to pay costs that would have a material adverse effect on the
business, financial condition, cash flow and results of operation of the
Company.
Koppers is aware of environmental contamination at the Monessen Facility,
which was purchased by Koppers after the Asset Closing (which site was not
previously owned by Beazer East and is thus not subject to the Indemnity).
Koppers has entered into the Monessen Consent Order with Pa-DEP in connection
with this site pursuant to which Koppers' liabilities for environmental
cleanup have been capped at $550,000 for environmental problems which have
been identified pursuant to the Monessen Consent Order.
Koppers purchased a wood treating facility located in Somerville, Texas from
Atchison, Topeka & Santa Fe Railway Company ("Santa Fe") in March 1995. At the
time of the purchase there were several existing environmental issues at the
facility. Santa Fe retained responsibility for remediating and monitoring all
closed solid waste units and surface impoundments at the facility that were in
existence at the time of the sale. Santa Fe indemnified Koppers for all
violations of Environmental Laws or releases of hazardous substances or
petroleum products that occurred before the sale. In addition, for the first
twelve years following the sale, Santa Fe is obligated to indemnify Koppers
for costs that exceed a specified annual cap ($50,000) when such costs arise
from a construction project that Koppers voluntarily initiates and also arise
from complying with Environmental Laws governing containment, disposal or
monitoring of hazardous substances at the site.
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<PAGE>
Koppers purchased a tar refinery located in Clairton, PA from Aristech in
April 1996. This tar refinery is located within the boundaries of a coke
facility owned and operated by U.S. Steel Group. U.S. Steel Group had sold the
tar refinery to Aristech in 1986. At the time of the purchase there were
several existing environmental issues at the tar refinery. When USX sold the
tar refinery to Aristech, it provided Aristech with a broad indemnity for
environmental contamination that predated the 1986 sale of the tar refinery to
Aristech. When Koppers purchased the tar refinery from Aristech, it assumed
Aristech's obligations and gained Aristech's protections under the USX
indemnity agreement. The principal obligation is that Koppers must pay for ten
percent (10%) of the environmental remediation costs incurred by USX in
implementing a consent decree concerning the tar refinery and USX's
surrounding coke facility, up to a maximum combined payment by both Koppers
and Aristech of $500,000. Prior to Koppers' purchase of the tar refinery,
Aristech had made payments of approximately $175,000 under the USX indemnity
agreement. To date, Koppers has not made any payments under this indemnity
provision. As part of the agreement with Aristech, Koppers agreed to indemnify
Aristech for environmental claims arising from operations at the tar refinery.
However, the requirement for Koppers to indemnity Aristech has several
exceptions, including but not limited to: claims for which USX will provide
indemnification, personal injury claims arising from a pre-sale chemical
release, and any incident listed on a schedule to the asset purchase
agreement.
At the Clairton facility, the Somerville facility and the Monessen Facility
(all of which Koppers acquired subsequent to the acquisition of the Beazer
East properties), remedial actions are being performed in accordance with
applicable regulations and all indemnification obligations are being honored
at the Clairton and Somerville facilities. The Company believes that the
sellers (or their predecessors) at both of these sites will conduct and
finance most investigative and cleanup activities directly. Although the
Company is not aware of any reason why such indemnification obligations will
not be performed, if Koppers were required to pay costs associated with
environmental contamination at these two sites, it could have a material
adverse effect on the business, financial condition, cash flow and results of
operations of the Company. The Monessen Facility was purchased pursuant to a
bankruptcy sale. Although an environmental indemnification was provided by the
seller of that facility to Koppers, Koppers does not expect that such
indemnification obligations will be honored. If contamination at the Monessen
Facility should be discovered which has not been identified pursuant to the
Monessen Consent Order, or if the US-EPA should require cleanup above the
$550,000 "cap" contained in the Monessen Consent Order, the costs associated
with such events could have a material adverse effect on Koppers' business,
financial position, cash flow and results of operations.
Koppers has made other asset acquisitions that involved purchase of real
property. While environmental indemnifications were obtained as part of the
transactions, the limited financial resources of the selling parties makes
fulfillment of these indemnifications unlikely. Material pre-purchase
environmental conditions identified during the due diligence leading up to
these acquisitions were addressed either before the purchase or immediately
afterwards.
From time to time, Koppers is served with notices of violation and requests
for information relating to environmental compliance matters at the various
facilities it owns and operates. In November 1996, Koppers received an
information request from US-EPA in regard to water discharges from its
facilities. Subsequent to this initial request, Koppers has received two
additional information requests from US-EPA. The initial request and the first
supplemental request have been answered. The second supplemental request is in
the process of being answered. While the US-EPA has not issued a notice of
violation in connection with these requests, there can be no assurance that
civil penalties or the requirement to expend capital resources will not arise.
In September 1996, Koppers was served with a notice of violation from the
Illinois Environmental Protection Agency ("IEPA") relating to 16 releases of
hazardous materials which occurred at or from its facility located in
Stickney, Illinois between January 24, 1990 and May 3, 1996. Koppers has
entered into negotiations with the IEPA to investigate four of the releases
which had the potential to cause groundwater or off-site contamination.
Although Koppers believes that all such releases were remediated when they
occurred, there can be no assurances that the IEPA will not require additional
action in connection with this matter.
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<PAGE>
In addition to the environmental issues discussed above, Koppers has
received or expects to receive notices of violations and requests for
information at its Monessen Facility and the Follansbee, Gainesville and
Stickney facilities that relate to matters which Koppers does not believe will
have a material impact on the business, financial condition, cash flow, and
results of operation of the Company.
On occasion, Koppers Australia has been served with notices relating to
environmental compliance issues arising in connection with its operations.
Koppers Australia was served with a notice by the Tasmanian Department of
Environment and Land Management ("DELM") which alleged that the Longford,
Tasmania facility was not in compliance with certain water discharge
requirements. Koppers Australia is currently in negotiations with the DELM
with respect to this issue. In addition, historic operations conducted at the
Koppers Australia facilities have resulted in identified and potential soil
and groundwater contamination of varying degrees. The Trentham, Victoria
facility is listed on the Victorian Register of Contaminated Sites. The
Rockhampton and Takura, Queensland facilities are listed on the Queensland
Register of Contaminated Sites as "probable sites". In addition, Koppers
Australia has identified various levels of groundwater contamination at the
Mayfield, New South Wales and Bunbury, Western Australia facilities. Although
the relevant regulatory authorities have not required the investigation or
remediation of these or other Koppers Australia facilities to date, these
authorities may require such work if Koppers Australia does not undertake such
activities itself. Costs associated with these activities may be material and
there can be no assurance that such costs will not have a material adverse
effect on the business, financial condition, cash flow and results of
operations of the Company.
EMPLOYEES AND EMPLOYEE RELATIONS
As of August 31, 1997, the Company employed 601 salaried employees and 1,643
hourly employees. Listed below is a breakdown of employees by business
segment, including administration.
<TABLE>
<CAPTION>
NON-
DIVISION SALARIED SALARIED TOTAL
- -------- -------- -------- -----
<S> <C> <C> <C>
Carbon Materials & Chemicals............................ 131 300 431
Railroad & Utility Products............................. 213 614 827
Coke Products........................................... 69 436 505
Koppers Australia....................................... 106 284 390
Administration.......................................... 82 9 91
--- ----- -----
Total Employees....................................... 601 1,643 2,244
=== ===== =====
</TABLE>
Of the Company's 2,244 employees, approximately 1,400 are represented by 17
different unions and covered under 29 separate labor contracts. The United
Steelworkers of America, covering workers at six facilities, accounts for the
largest membership with more than 500 employees. Another significant
affiliation is the Oil, Chemical, and Atomic Workers Union, with approximately
300 employees at four facilities. Labor negotiations are conducted on a plant-
by-plant basis and approximately one-fourth of the outstanding contracts are
renegotiated in any one year.
In the last five years, the Company has had three work stoppages due to
strikes at its Follansbee, Somerville and Galesburg facilities. The Follansbee
strike occurred in November 1993 and the Somerville and Galesburg strikes
occurred in March 1996. In each instance, the Company was able to continue
operation of the respective facilities at approximately 85% of capacity and to
reach agreement with each of the unions on terms satisfactory to the Company.
There can be no assurance that the Company would be able to continue operating
facilities in the event of further work stoppages or union disputes in the
future.
LEGAL PROCEEDINGS
Jefferson County issued a notice of violation on March 11, 1996 in
connection with various alleged violations of Jefferson County's air pollution
control rules and regulations for emissions from coke oven batteries
64
<PAGE>
at Koppers' Woodward Coke Facility. On February 14, 1997, the US-EPA sent a
notice of violation to Koppers that covered the same issues identified in the
Jefferson County notice of violation. Koppers has entered into a settlement
agreement with Jefferson County; however, there can be no assurance that the
US-EPA will not seek additional actions or penalties that could have a
material adverse effect on the business, financial condition, cash flow and
results of operations of the Company. See "Business--Environmental Matters."
Koppers was served with a notice of violation from the Pennsylvania
Department of Environmental Protection ("Pa-DEP"), which alleged Koppers was
not in compliance with a plan approval issued by Pa-DEP for the Monessen
Facility. The notice alleges that the Monessen Facility is emitting more
nitrogen oxides than is allowed by the plan approval. Koppers also received a
notice of violation in connection with a failure to conduct timely emission
monitoring testing on the boilers at the facility. Koppers has installed
additional equipment and modified existing equipment to improve the quality of
boiler emissions. Resolution of these matters could have a negative effect on
the business, financial condition, cash flow and results of operations of the
Company. Koppers has submitted an amended plan approval application to Pa-DEP
that provides for limitations on the operation of the two boilers at the
Monessen Facility. Pa-DEP is currently reviewing this application. As a result
of the failure to meet the original nitrogen oxide emission limitations, it is
expected that Pa-DEP will propose a civil penalty in an amount of
approximately $100,000. See "Business--Environmental Matters."
On June 12, 1996, Pa-DEP issued a notice of violation in connection with an
alleged noncompliance with the terms of a Consent Agreement between the
Company and Pa-DEP regarding liability for environmental conditions existing
at the time Koppers purchased the Monessen Facility. The notice of violation
alleged that Koppers had not implemented the corrective actions required under
the Consent Agreement in a timely fashion. Pa-DEP has calculated that a
stipulated penalty in the amount of $261,000 may be requested under the
Consent Agreement for the alleged untimely actions. Koppers has completed the
implementation of the corrective actions at issue and is in the process of
conducting settlement negotiations with Pa-DEP to agree upon the amount of the
stipulated penalty to be assessed in connection with this matter. See
"Business--Environmental Matters."
The Company is involved in various other proceedings relating to
environmental laws and regulations. See "Business--Environmental Matters."
The Company is involved in various other proceedings incidental to the
ordinary conduct of its business. The Company believes that none of these
other proceedings will have a material adverse effect on the business,
financial condition, cash flow and results of operations of the Company.
PROPERTIES
The principal fixed assets of the Company consist of its production,
treatment, and storage facilities and its transportation and plant vehicles.
Its numerous production facilities consist of five Carbon Materials &
Chemicals facilities, 15 wood treating facilities, 14 facilities in the South
Pacific and the Woodward Coke and Monessen Facilities. See "--Carbon Materials
& Chemicals," "--Railroad & Utility Products" and "--Coke Products." As of
December 31, 1996, vehicles and equipment represented approximately 40% of the
Company's total assets, as reflected in its consolidated balance sheet. The
following chart sets forth information regarding the Company's facilities:
<TABLE>
<CAPTION>
DESCRIPTION OF
DIVISION/PLANT LOCATION ACREAGE PROPERTY INTEREST
- -------------- -------- ------- -----------------
<S> <C> <C> <C>
CARBON MATERIALS & CHEMICALS
Clairton Clairton, PA 17 Owned
Follansbee Follansbee, WV 32 Owned
Portland Portland, OR 6 Leased through 12/31/98
Stickney Cicero, IL 38 Owned
Woodward Dolomite, AL 23 Owned
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF
DIVISION/PLANT LOCATION ACREAGE PROPERTY INTEREST
- -------------- -------- ------- -----------------
<S> <C> <C> <C>
RAILROAD &
UTILITY PRODUCTS
Denver Denver, CO 5 Owned
Feather River Oroville, CA 156 Owned
Florence Florence, SC 200 Owned
Gainesville Gainesville, FL 86 Owned
Galesburg South Galesburg, IL 125 Leased year to year
Green Spring Green Spring, WV 98 Owned
Grenada Tie Plant, MS 154 Owned
Guthrie Guthrie, KY 122 Owned
Logansport Logansport, LA 30 Owned
Montgomery Montgomery, AL 84 Owned
North Little
Rock N. Little Rock, AR 148 Owned
Roanoke Valley Salem, VA 91 Owned
Somerville Somerville, TX 244 Owned
Superior Superior, WI 120 Owned
Susquehanna Montgomery, PA 109 Owned
COKE PRODUCTS
Monessen Monessen, PA 45 Owned
Woodward Dolomite, AL 136 Owned
KOPPERS
AUSTRALIA
Koppers-Hickson Trentham, Victoria 24 Owned
Auckland, New Zealand 1.3 Leased
Penang, Malaysia 3 Leased
Fiji .7 Owned
South Africa .3 Leased
Koppers Timber
Preservation Bunbury, West Australia 13.7 Leased
Grafton, New South Wales 100 Owned
Hume, Australia Capital Territory 50 Leased
Longford, Tasmania 16.5 Owned
Rockhampton, Queensland 3.5 Leased
Takura, Queensland 79 Leased
Thorton, New South Wales 15 Owned
Koppers Coal Tar
Products Mayfield, New South Wales 26 Owned
Continental Kurnell, New South Wales 20 Leased
Carbon Australia
Pty Ltd.
</TABLE>
The Company's corporate headquarters are located in approximately 50,000
square feet of leased office space in the Koppers Building, Pittsburgh,
Pennsylvania. The office space is leased from Axiom Real Estate Management,
Inc. pursuant to an 11-year lease, with the initial term expiring December 31,
2003. The lease provides for an additional five-year renewal option.
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MANAGEMENT
The following table sets forth the names and ages of the executive officers
and Directors of the Company and the positions which they hold. Directors hold
their positions until the annual meeting of the stockholders at which their
term expires or until their respective successors are elected and qualified.
Executive officers hold their positions until the annual meeting of the Board
of Directors or until their respective successors are elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
<S> <C> <C>
Robert K. Wagner........ 66 Chairman, Acting Chief Executive Officer and Director
Clayton A. Sweeney...... 66 Director
Brooks C. Wilson........ 64 Director
N. H. Prater............ 69 Director
Christian L. Oberbeck... 37 Director
Donald E. Davis......... 40 Vice President and Chief Financial Officer
Thomas D. Loadman....... 43 Vice President and General Manager, Railroad Products & Services
William R. Donley....... 40 Vice President and General Manager, Utility & Construction Products
Walter W. Turner........ 50 Vice President and General Manager, Carbon Materials & Chemicals
Randall D. Collins...... 45 Vice President, Corporate Services and Secretary
Joseph E. Boan.......... 50 Vice President, Human Resources
Robert H. Wombles....... 45 Vice President, Technology
M. Claire Schaming...... 44 Treasurer and Assistant Secretary
</TABLE>
Mr. Wagner was elected Chairman and Chief Executive Officer of Koppers in
November 1994, having served as President and Chief Executive Officer from
1988 through 1994. As of March 1, 1996, he resigned his position as Chief
Executive Officer, retaining his responsibilities as Chairman and Director. As
of June 10, 1997, he assumed the position of Acting Chief Executive Officer.
He has been a Director of Koppers since January 1989. He joined Old Koppers in
1953 and after an early career in communications, moved into the forest
products business in 1968 and held sales, marketing and raw materials posts
until being appointed Vice President and Manager of the Pressure-Treated
Products unit in 1975. Mr. Wagner became Vice President and General Manager of
this division in 1978 and was named Vice President and General Manager of the
Tar and Wood Products Sector in 1986. Mr. Wagner also served as a Director of
Integra Financial Corporation of Pittsburgh, Pennsylvania from 1992 until 1996
and as a Director of Trion, Inc. of Sanford, North Carolina from 1978 until
his resignation in April 1995. He is also a Director of Koppers Australia and,
until March 1, 1996, was a Director of Tarconord.
Mr. Sweeney has been a Director of Koppers since January 1989. Mr. Sweeney
has been a shareholder and Director of Dickie, McCamey & Chilcote, P.C. since
1987 and served as Managing Director from 1988 to September 1993. Mr. Sweeney
previously served as Executive Vice President, Chief Administrative Officer,
Vice Chairman, and a Director of Allegheny International, Inc., as Senior Vice
President and a Director of Allegheny Ludlum Industries, and as a Director of
Wilkinson Sword Group, Ltd. U.K., Landmark Savings and Loan Association,
Halbouty Energy Company and Liquid Air Corporation. Mr. Sweeney currently
serves as a Director of Schaefer Manufacturing Inc., Schaefer Equipment, Inc.,
and Schaefer Marine Inc., and as Chairman of the Boards of St. Francis Health
System and St. Francis Medical Center.
Mr. Wilson has been a Director of Koppers since January 1989. Mr. Wilson has
been the Managing Director of Koppers Australia since 1970 having joined Old
Koppers in 1965 as a member of the Koppers International Far East Office
(Sydney, Australia). He is currently a Director of Pacific Power and the State
Transit Authority of New South Wales. He is also Chairman of Trustees,
Australian Trade Union Program at Harvard Foundation and a member of the
Advisory Council, Australian Graduate School of Management, University of New
South Wales.
Mr. Prater has been a Director of Koppers since May 1989. Mr. Prater retired
from Mobay Corporation, where he served as the President and Chief Executive
Officer from July 1986 to July 1990. He currently serves
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<PAGE>
as a Director of Calgon Carbon Corporation, Melamine Chemical Inc. and Harsco
Corporation. He is a member of the Board of Trustees of Robert Morris College,
Georgia Institute of Technology, a special trustee of the University of
Pittsburgh and a Director of the University of Pittsburgh Medical Center,
Pittsburgh Presbyterian Hospital, and is Chairman of the Board of Visitors of
the University of Pittsburgh Graduate School of Public and International
Affairs.
Mr. Oberbeck has been a Director of Koppers since October 20, 1997. Mr.
Oberbeck has been a Managing Director of SBC Warburg Dillon Read Inc. since
September 1997. Previously, he was a Managing Director of Dillon, Read & Co.
Inc. from February 1995 to September 1997. Prior to joining Dillon, Read & Co.
Inc., Mr. Oberbeck was a Managing Director of Castle Harlan, Inc. where he
worked from October 1987 until February 1995. Mr. Oberbeck is a member of the
Saratoga Partners Investment Committee and a Director of J&W Scientific
Incorporated and USI Holdings Corporation.
Mr. Davis was elected Vice President and Chief Financial Officer of Koppers
in November 1994. Mr. Davis had been General Manager of Koppers' Recovery
Resources Group from June 1992 to March 1996 and served as Treasurer from 1988
until 1992. He joined Old Koppers in 1978 and held various positions in the
corporate accounting and auditing departments until being named General
Manager of the Chemical Systems Sector at Old Koppers in 1988. Mr. Davis is a
certified public accountant.
Mr. Loadman was elected Vice President and Manager, Railroad Products &
Services in November 1994. Mr. Loadman had been the Transportation Plants
Operations Manager of the Railroad & Utility Products division since January
1989. He joined Old Koppers in 1979 and served in various management
assignments including plant manager and cogeneration plant manager. Mr.
Loadman is a Director of Koppers Sherman Abetong, a Director of Koppers Timber
Preservation Pty Limited, a subsidiary of Koppers Australia, and a Director
and President of Koppers Concrete Products Inc. He is also a member of the
American Wood Preservers Association and the Railway Tie Association.
Mr. Donley was appointed General Manager of Utility & Construction Products
in September 1995 and elected Vice President in November 1995. He joined Old
Koppers in 1979, serving the Company in positions of increasing responsibility
within the Railroad & Utility Products business. Mr. Donley is a board member
of the American Wood Preservers Institute and serves on its Governmental
Affairs Committee.
Mr. Turner was appointed Vice President and General Manager, Carbon
Materials & Chemicals division in early 1995. Mr. Turner had been elected Vice
President and Manager, Marketing & Development, Industrial Pitches and Related
Products in February 1992. Mr. Turner was Marketing Manager, Industrial
Pitches and Creosote Oils for Old Koppers' Tar and Wood Products Sector. Mr.
Turner joined Old Koppers in 1969 and has served in various positions in the
controller's department and as Product Manager, Tar Operations. Mr. Turner is
also a Director of Tarconord.
Mr. Collins was elected Vice President and Secretary in November 1994, and
has been Secretary of Koppers since January 1989. Mr. Collins was Manager of
Loss Control for Old Koppers. He joined Old Koppers in 1974 and held various
line and staff assignments including personnel, industrial relations, and
plant operations. Currently Mr. Collins serves the Company as Vice President,
Corporate Services. His responsibilities include establishing policy and
assuring regulatory compliance for environmental, safety and health matters,
coordination of legal affairs and shareholder relations. Mr. Collins is a
member of the American Society of Corporate Secretaries.
Mr. Boan has been Vice President, Human Resources since January 1989. Mr.
Boan was Manager, Labor Relations for Old Koppers. He joined Old Koppers in
1969. Prior to 1987, Mr. Boan held the position of Director, Human Resources,
for three Old Koppers subsidiaries in the Construction Materials and Services
Group. In 1987, he was named Manager, Labor Relations for Old Koppers. Mr.
Boan is a member of the Pennsylvania Bar.
Mr. Wombles joined the Company in June 1997 and was elected Vice President,
Technology. Prior to joining Koppers, Mr. Wombles was Vice President,
Research, Applications and Development for Ashland Oil,
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<PAGE>
Inc. Mr. Wombles has published a series of technical articles on hydrocarbon
processing and holds five patents on related methodologies.
Ms. Schaming was elected Treasurer in May 1992. Her previous position was
Assistant Treasurer and Manager of Cash Operations. Ms. Schaming joined Old
Koppers in 1976, where she held various positions in corporate and Chemical
Systems Sector accounting, including controller for the Polyester Resins
Division. Ms. Schaming is a certified cash manager.
STOCKHOLDERS' AGREEMENT; NEW STOCKHOLDERS' AGREEMENT
The Company is a party to a Stockholders' Agreement by and among the
Company, Saratoga and each Management Investor dated as of December 1, 1997
(as amended, the "Stockholders' Agreement"). The Management Investors are a
group of approximately 120 individual stockholders (each, a "Management
Investor") with ownership interests ranging from .01% to 8.62% of the voting
Common Stock and collectively comprising 100.0% of the total outstanding
shares of the voting Common Stock. Each Management Investor is an officer,
Board member or current or former employee of either Koppers Industries, Inc.
or one of its subsidiaries. Pursuant to the Stockholders' Agreement, each of
the Management Investors has appointed Robert K. Wagner and Clayton A. Sweeney
as the two Representatives ("Representatives") of the Management Investors and
granted to the Representatives an irrevocable proxy for the term of the
Stockholders' Agreement to vote all his or her voting shares.
As of September 30, 1997, Koppers was obligated to purchase approximately
235,000 shares of previously terminated Management Investors.
The Stockholders' Agreement sets forth supermajority voting requirements for
the Board of Directors for certain matters, including the issuance of
additional stock, mergers, consolidations, acquisitions, significant asset
sales, and the incurrence of material indebtedness and changes in certain
senior management. Saratoga is entitled to nominate a majority of the Board of
Directors. The Stockholders' Agreement requires the Company to redeem shares
upon a Management Investor's ceasing for any reason to be employed by the
Company.
DIRECTOR COMPENSATION
Koppers does not pay compensation to Directors who are also employees. Each
Director who is not an employee is paid a fee of $22,000 per year.
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SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to the Company, including options and stock
appreciation rights ("SARS"), for the years ended December 31, 1996, 1995 and
1994, of those persons who were at December 31, 1996 the current and former
Chief Executive Officers and each of the other four most highly compensated
executive officers of the Company who earned more than $100,000 in salary and
bonus in 1996 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
OTHER SECURITIES ALL
NAME AND ANNUAL UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION (2)
- ----------------------- ---- -------- -------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Donald P. Traviss 1996 $336,000 $117,306 $ 277 -- $11,576
President and Chief 1995 251,000 138,000 126,341(3) 45,000 3,861
Executive Officer (1) 1994 38,333 40,000 28,492 -- 1,567
Donald E. Davis 1996 151,985 55,159 -- -- 11,576
Vice President and
Chief 1995 132,860 61,446 -- 7,500 4,038
Financial Officer 1994 106,590 24,305 -- -- 1,888
Walter W. Turner 1996 128,400 53,305 -- -- 11,876
Vice President and
General 1995 106,920 53,767 -- 7,500 3,466
Manager, Carbon
Materials 1994 91,200 22,095 -- -- 1,599
& Chemicals
Lawrence F. Flaherty 1996 132,600 47,636 1,400 -- 11,576
Vice President, Total 1995 127,100 59,850 694 -- 4,204
Quality and Technology
(4) 1994 124,000 29,460 666 -- 1,023
Joseph E. Boan 1996 120,980 43,428 -- -- 9,613
Vice President 1995 116,380 56,792 -- -- 2,853
Human Resources 1994 111,880 26,116 -- -- 1,960
Robert K. Wagner 1996 107,955 27,930 1,108 -- 136,576
Chairman and Acting
Chief 1995 380,000 228,000 14,143 -- 4,649
Executive Officer (1) 1994 344,750 98,102 15,821 -- 3,000
</TABLE>
- --------
(1) Effective June 9, 1997 Mr. Traviss resigned from the Company as President
and Chief Executive Officer, and Mr. Wagner assumed the position of acting
Chief Executive Officer.
(2) All other compensation consists of regular and supplemental matches to
401(k) plan, and, in the case of Mr. Wagner, also includes $17,500 for
director fees, $16,667 for chairman fees, and $90,833 for consulting
services to the Company.
(3) Includes $116,410 of reimbursement of moving expenses under Company
relocation program.
(4) Effective July 31, 1997 Mr. Flaherty retired from Koppers.
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<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to unexercised options granted in
1996 and prior years under the Company's stock option plan. There were no
options exercised in 1996 by any of the Named Executive Officers. No SARS were
granted to any of the Named Executive Officers and none of the Named Executive
Officers held any unexercised SARS at the end of the fiscal year 1996.
AGGREGATED OPTION/SARS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
--------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS (1)
---------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald P. Traviss........ 30,000 shs. 15,000 shs. $103,333 $51,667
Donald E. Davis.......... 21,400 5,000 220,564 17,222
Walter W. Turner......... 17,350 5,000 172,320 17,222
Lawrence F. Flaherty..... 28,800 -- 341,432 --
Joseph E. Boan........... 27,900 -- 329,832 --
</TABLE>
- --------
(1) The value of unexercised in-the-money options is calculated by subtracting
the exercise price from $14.00 which was the market value at December 31,
1996 as determined by the Board of Directors pursuant to the provisions of
the Stockholders' Agreement.
BENEFIT PLANS
PENSION PLAN. All executive officers of the Company are covered by the
Retirement Plan of Koppers Industries, Inc. and Subsidiaries for Salaried
Employees (the "Salaried Plan"). The following table contains approximate
retirement benefits payable under the Salaried Plan, assuming retirement at
age 65, payments made on the straight-life annuity basis and no election of a
co-annuitant option.
ESTIMATED ANNUAL RETIREMENT BENEFIT UNDER THE SALARIED PLAN
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE AT RETIREMENT
TERMINAL -------------------------------------------------------------------------
SALARY 5 10 15 20 25 30
- -------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 7,680 $15,360 $ 23,040 $ 30,720 $ 38,400 $ 46,080
125,000 9,680 19,360 29,040 38,720 48,400 58,080
150,000 11,680 23,360 35,040 46,720 58,400 70,080
200,000 15,680 31,360 47,040 62,720 78,400 94,080
250,000 19,680 39,360 59,040 78,720 98,400 118,080
300,000 23,680 47,360 71,040 94,720 118,400 142,080
350,000 27,680 55,360 83,040 110,720 138,400 166,080
400,000 31,680 63,360 95,040 126,720 158,400 190,080
450,000 35,680 71,360 107,040 142,720 178,400 214,080
500,000 39,680 79,360 119,040 158,720 198,400 238,080
</TABLE>
The following describes the Terminal Salary and Years of Service,
respectively, accrued as of December 31, 1996 for each Named Executive
Officer: Donald P. Traviss, $282,500 and 2 years of service; Donald E. Davis,
$126,371 and 8 years of service; Walter W. Turner, $108,732 and 8 years of
service; Lawrence F. Flaherty, $139,053 and 8 years of service; Joseph E.
Boan, $123,405 and 8 years of service; and Robert K. Wagner, $402,635 and 7
years of service.
71
<PAGE>
EMPLOYMENT CONTRACTS. In February 1996, the Company entered into an
agreement with Robert K. Wagner, Chairman and Director, under which in
exchange for consulting services and continuing in the position as Chairman of
the Board of Directors the Company agreed to pay consulting fees totaling
$109,000 per year. The initial contract term of one year will automatically
renew for four additional one-year periods unless either party elects to
cancel the contract. Upon his assumption of the position of Acting Chief
Executive Officer of the Company in June 1997, the consulting fees were
increased to $359,000 per year, plus participation in the Company's incentive
compensation program.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Sweeney, Mr. Wilson and Mr. Prater serve on the Human Resources and
Compensation Committee of the Board of Directors of the Company, which
establishes compensation levels for the Company's three most highly paid
executive officers.
Mr. Wagner, Chairman and a Director of the Company, is a member of the
Compensation Committee of the Board of Directors of Koppers Australia. This
Committee reviews the compensation of Mr. Wilson, a Managing Director of
Koppers Australia.
72
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table presents certain information regarding the beneficial
ownership of the Company's Common Stock at September 30, 1997, and on a pro
forma basis after consummation of, the Cornerstone-Spectrum, Inc. share
purchase and Recapitalization, respectively, by (i) each person known to the
Company to beneficially own more than five percent of the outstanding shares
of the Common Stock, (ii) each Director of the Company, (iii) each executive
officer and (iv) all officers and Directors of the Company as a group.
<TABLE>
<CAPTION>
ACTUAL
---------------------------------------------------
VOTING NON-VOTING
COMMON STOCK COMMON STOCK (2)
------------------------- -------------------------
SHARES PERCENTAGE SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED (1) OWNED OWNED OWNED
BENEFICIAL OWNER ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cornerstone-Spectrum, Inc.. 2,117,952 30.99% 1,815,000 50.02%
Saratoga (3)...............
Saratoga Koppers (3).......
KAP Investments, Inc. (4).. 2,250,000 32.92%
APT Holdings Corporation
(5)........................ 1,813,200 49.98%
Management Investors
(6)(7)..................... 2,466,639 36.09%
Christian L. Oberbeck (3)..
Robert K. Wagner (8)....... 349,487 5.11%
Clayton A. Sweeney (8)..... 138,960 2.03%
Donald E. Davis (9)........ 44,057 *
Walter W. Turner (10)...... 41,736 *
Joseph E. Boan (11)........ 74,493 1.09%
N.H. Prater (12)........... 26,569 *
Brooks C. Wilson (13)...... 96,579 1.41%
All Directors and Officers
as a group (13 persons)... 937,087 13.71%
--------- ------ --------- ------
Total Shares Outstanding
(7)........................ 6,834,591 100.00% 3,628,200 100.00%
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CORNERSTONE-SPECTRUM PRO FORMA
SHARE PURCHASE REFINANCING (14)
--------------------------------------------------- ---------------------------------------------------
VOTING NON-VOTING VOTING
COMMON STOCK COMMON STOCK COMMON STOCK PREFERRED STOCK
------------------------- ------------------------- ------------------------- -------------------------
SHARES PERCENTAGE SHARES PERCENTAGE SHARES PERCENTAGE SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY
OWNED OWNED OWNED OWNED OWNED OWNED OWNED OWNED
BENEFICIAL OWNER ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cornerstone-
Spectrum, Inc...
Saratoga (3).... 2,117,952 30.99% 464,180 20.38% 2,145,624 100%
Saratoga Koppers
(3)............. 2,117,952 30.99% 464,180 20.38% 2,145,624 100%
KAP Investments,
Inc. (4)........ 2,250,000 32.92%
APT Holdings
Corporation (5). 1,813,200 79.62%
Management
Investors
(6)(7).......... 2,466,639 36.09% 1,584,286 100.00%
Christian L.
Oberbeck (3).... 2,117,952 30.99% 464,180 20.38% 2,145,624 100%
Robert K. Wagner
(8)............. 349,487 5.11% 349,487 22.06%
Clayton A.
Sweeney (8)..... 138,960 2.03% 138,960 8.77%
Donald E. Davis
(9)............. 44,057 * 44,057 2.78%
Walter W. Turner
(10)............ 41,736 * 41,736 2.63%
Joseph E. Boan
(11)............ 74,493 1.09% 74,493 4.70%
N.H. Prater
(12)............ 26,569 * 26,569 1.68%
Brooks C. Wilson
(13)............ 96,579 1.41% 96,579 6.10%
All Directors
and Officers as
a group (13
persons)....... 937,087 13.71% 937,087 59.15%
--------- ------ --------- ------ --------- ------ --------- ---
Total Shares
Outstanding (7). 6,834,591 100.00% 2,277,380 100.00% 1,584,286 100.00% 2,145,624 100%
</TABLE>
- --------
* 1% or less.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, and includes voting and/or investment
power with respect to the shares shown as beneficially owned.
(2) Non-Voting Common Stock is entitled to received dividends ratably with
Voting Common Stock. Non-Voting Common Stock has been issued upon the
conversion of Series B Junior Convertible Preferred Stock and upon the
exercise of warrants granted to certain of the Company's lenders.
(3) Saratoga is a private investment fund. Saratoga Koppers is an affiliate of
Saratoga. The address for Saratoga and Saratoga Koppers is 535 Madison
Avenue, New York, NY 10022. Saratoga and Saratoga Koppers have generally
authorized Mr. Oberbeck, a Director of the Company, to vote the shares of
the Company held by
73
<PAGE>
Saratoga and Saratoga Koppers. On a pro forma basis after giving effect to
the Saratoga Investment, Saratoga directly owns 2,117,952 shares of voting
Common Stock and 27,672 shares of non-voting Common Stock and Saratoga
Koppers directly owns 436,508 shares of non-voting Common Stock. On a pro
forma basis after giving effect to the Recapitalization, Saratoga directly
owns 2,145,624 shares of preferred stock. Mr. Oberbeck disclaims beneficial
ownership of the shares of Common Stock owned by Saratoga and Saratoga
Koppers. Upon consummation of the Recapitalization, Saratoga will be
entitled to elect a majority of the Board of Directors and to exercise a
majority of the voting power of all outstanding stock of the Company.
(4) KAP Investments, Inc. is a wholly owned subsidiary of Koppers Australia.
The address for KAP Investments, Inc. is 15 Blue Street, North Sydney,
NSW, Australia. KAP Investments, Inc. has authorized Mr. Brooks C. Wilson,
a Director of the Company, to vote the shares of the Company held by KAP
Investments, Inc.
(5) APT Holdings Corporation is a wholly-owned subsidiary of Mellon Bank
Corporation ("MBC"). Mellon Bank, N.A., which is also a wholly-owned
subsidiary of MBC, also serves as the administrative and collateral agent
for the Company's bank credit facilities. The address for APT Holdings
Corporation is One Mellon Bank Centre, Room 4500, Pittsburgh, PA 15258.
(6) Pursuant to the Stockholders' Agreement, Mr. Wagner and Mr. Sweeney were
appointed as Representatives of the approximately 140 Management Investors
and granted irrevocable proxies to vote the shares of Common Stock owned
by the Management Investors for the term of the Stockholders' Agreement.
Upon consummation of the Recapitalization and the completion of the
Recapitalization, new proxies will be executed by the current shareholder
employees appointing Mr. Wagner and Mr. Sweeney as representatives of the
Management Investors. See "Management--Stockholders' Agreement". The
address for Mr. Wagner is Koppers Industries, Inc., 436 Seventh Avenue,
Pittsburgh, PA 15219. The address for Mr. Sweeney is Dickie, McCamey &
Chilcote, P.C., Two PPG Place, Suite 400, Pittsburgh, PA 15222.
(7) Includes vested options held by the Management Investors to acquire
549,974 shares of Common Stock which are exercisable at any time after the
consummation of the Recapitalization.
(8) Mr. Wagner and Mr. Sweeney, as Representatives of the Management Investors
pursuant to the Stockholders' Agreement, have the authority to vote the
2,466,639 shares held by the Management Investors and consequently may be
deemed to have voting control of such shares (which include 349,487 shares
directly owned by Mr. Wagner and 138,960 shares directly owned by Mr.
Sweeney).
(9) Includes vested options to purchase 23,900 shares. Pursuant to the
Stockholders' Agreement, Mr. Davis has granted an irrevocable proxy to the
Representatives of the Management Investors to vote the shares owned by
him until consummation of the Recapitalization.
(10) Includes vested options to purchase 19,850 shares. Pursuant to the
Stockholders' Agreement, Mr. Turner has granted an irrevocable proxy to
the Representatives of the Management Investors to vote the shares owned
by him until consummation of the Recapitalization.
(11) Includes vested options to purchase 27,900 shares. Pursuant to the
Stockholders' Agreement, Mr. Boan has granted an irrevocable proxy to the
Representatives of the Management Investors to vote the shares owned by
him until consummation of the Recapitalization.
(12) Pursuant to the Stockholders' Agreement, Mr. Prater has granted an
irrevocable proxy to the Representatives of the Management Investors to
vote the shares owned by him until consummation of the Recapitalization.
(13) Mr. Wilson directly owns 96,579 shares. Pursuant to the Stockholders'
Agreement, Mr. Wilson has granted an irrevocable proxy to the
Representatives of the Management Investors to vote the 96,579 shares
owned by him until consummation of the Recapitalization.
(14) Assumes that (i) APT Holdings Corporation redeems all shares; (ii) all
Non-Voting Common Stock is retired and held in Treasury; (iii) KAP
Investments, Inc. shares are retired and held in Treasury;
(iv) Management Investors redeem 882,353 shares; and (v) no shares are
redeemed by Directors and Officers.
74
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dickie, McCamey & Chilcote, P.C. of Pittsburgh, Pennsylvania, has been
retained as general counsel to the Company. Clayton A. Sweeney, a shareholder
and Director of the Company, is also a shareholder and Director of Dickie,
McCamey & Chilcote, P.C. Mr. Sweeney is one of two Representatives of the
Management Investors appointed pursuant to the Stockholders' Agreement and, as
such, was granted an irrevocable proxy for the term of the Stockholders'
Agreement to vote the shares of the Management Investors. See "Management--
Stockholders' Agreement."
Pursuant to a resolution of the Board of Directors, Koppers redeemed, on
April 2, 1996, 25% of the shares of Common Stock then held by Mr. Wagner at
$12.33 per share.
On March 13, 1996, Cornerstone-Spectrum, Inc. converted all of its shares of
Series B Junior Convertible Preferred Stock into shares of non-voting Common
Stock, $.01 par value, in accordance with Section 8(e) of the Certificate of
Designation of the Series B Preferred Stock. On March 22 and March 25, 1996,
Koppers redeemed 1,050,000 shares of the non-voting Common Stock at $11.67 per
share, 525,000 shares each from Cornerstone-Spectrum, Inc. and APT Holdings
Corporation. In October 1997, all shares of Common Stock held by Cornerstone-
Spectrum, Inc. were purchased by the Offeree Stockholders and subsequently
transferred to the Company, Saratoga and Saratoga Koppers. In addition, all
shares of Common Stock held by APT Holdings Corporation will be redeemed as
part of the Recapitalization. See "Principal and Selling Stockholders."
In connection with the Recapitalization, the Company paid a transaction fee
of $1.4 million to an affiliate of Saratoga, and a financial advisory fee of
$1.4 million to the Initial Purchaser, in consideration for advisory services
related to the structuring and financing of the Saratoga Investment and the
Recapitalization.
Koppers has entered into an advisory and consulting agreement with Saratoga
pursuant to which the Company will pay a management fee of $150,000 per
quarter to Saratoga. In addition, Saratoga will provide the Company with
advisory services in connection with significant business transactions, such
as acquisitions, for which the Company will pay Saratoga compensation
comparable to compensation paid for such services by similarly situated
companies.
DESCRIPTION OF NEW CREDIT FACILITIES
Koppers has established New Credit Facilities of $275.0 million aggregate
principal amount with Swiss Bank Corporation, Stamford Branch and Mellon Bank,
N.A. The New Credit Facilities will be syndicated among several lenders who
will be parties thereto (collectively, the "Lenders"), with SBC Warburg Dillon
Read Inc. as arranger and syndication agent, Swiss Bank Corporation, Stamford
Branch, as documentation agent, and Mellon Bank, N.A., as administrative agent
(the "Administrative Agent") (the Administrative Agent together with the other
agents, the "Agents"). The following is a summary description of the principal
terms of the New Credit Facilities. The description set forth below does not
purport to be complete and is qualified in its entirety by reference to the
agreements setting forth the principal terms and conditions of the New Credit
Facilities, which are available upon request from Koppers.
Structure. The New Credit Facilities consist of (a) a Term Loan A Facility
in an aggregate principal amount of $70 million, (b) a Term Loan B Facility in
an aggregate principal amount of $65 million and (c) a Revolving Credit
Facility for up to $140 million, including (i) up to $20 million of such
amount being available as a standby or trade letter of credit sub-facility;
(ii) $10 million of such amount being available as a swing-line sub-facility
and (iii) up to $40 million and $20 million of such amount being exclusively
reserved for use in connection with the Australian Term Letter of Credit and
the Australian Revolving Letter of Credit described below, respectively.
75
<PAGE>
National Australia Bank, Limited provided an Australian dollar ("A$")
denominated term loan to Koppers Australia and certain of its subsidiaries who
are Subsidiary Guarantors in an aggregate principal amount equivalent to US$40
million. As credit support for such term loan, an A$ denominated letter of
credit (the "Australian Term Letter of Credit") was issued under the Revolving
Credit Facility to such Australian lender in the amount of A$59,303,187.55.
Commonwealth Bank of Australia provided an A$ denominated revolving loan
facility for the benefit of Koppers Australia and certain of its subsidiaries
who are Subsidiary Guarantors with availability of up to the equivalent of
US$10 million. As credit support for such Australian revolving facility, an A$
denominated letter of credit (the "Australian Revolving Letter of Credit") was
issued under the Revolving Credit Facility to such Australian lender in the
amount of A$14,825,796.89. To the extent that currency fluctuations cause the
face amount of the Australian Term Letter of Credit or the Australian
Revolving Letter of Credit to exceed on a US$ equivalent basis their
respective subfacility limits, availability will be correspondingly reduced
under the Revolving Credit Facility.
Availability. Loans under the Term Loan A Facility are available in multiple
draws for up to 364 days from the date on which the other transactions were
consummated and all other conditions to closing were met (the "Closing Date")
for use as follows: on the Closing Date, to provide a portion of the proceeds
necessary to consummate the Recapitalization and to pay related fees and
expenses, and after the Closing Date, to repurchase Senior Notes not tendered
in the Tender Offer or to repurchase shares of the Company's common stock
owned by management or the redemption of shares of Common Stock held by APT
Holdings Corporation if consummated after the Closing Date. Loans under the
Term Loan B Facility and the Australian term loan were drawn on the Closing
Date to provide a portion of the proceeds necessary to consummate the
Recapitalization and to pay related fees and expenses. The Revolving Credit
Facility and the Australian revolving facility are available at any time
during the six-year period following the Closing Date subject to the
fulfillment of certain conditions precedent including the absence of a default
under the New Credit Facilities.
Security; Guarantee. The Company's obligations under the New Credit
Facilities are guaranteed by any subsidiary which guarantees indebtedness
represented by the Notes, Koppers Australia, any subsidiary of the Company
which owns Capital Stock of Koppers Australia and each subsequently acquired
or organized significant subsidiary of the Company, subject to certain
exceptions. The New Credit Facilities and the guarantees thereof are secured
by a perfected first priority lien on, and pledge of, all of the capital stock
and intercompany notes of each of the direct and indirect subsidiaries of the
Company on the Closing Date or thereafter created or acquired and a perfected
first priority security interest in all substantial tangible and intangible
assets and proceeds of the foregoing of the Company and the guarantors subject
to certain permitted liens.
Interest; Maturity. Borrowings under the Term Loan A Facility, the Revolving
Credit Facility and the Australian facilities bear interest, payable
quarterly, at a rate per annum equal to: (i) LIBOR (or in the case of the
Australian facilities, the Bank Swap Reference Rate) plus an applicable margin
or (ii) the Administrative Agent's prime rate (the "base rate") plus an
applicable margin. Borrowings under the Term Loan B Facility bear interest,
payable quarterly, at a rate per annum equal to LIBOR plus an applicable
margin. The initial applicable margin is 1.75% per annum for LIBOR loans and
Bank Swap Reference Rate loans, as the case may be, under the Term Loan A
Facility and the Revolving Credit Facility (including the Australian Term
Letter of Credit and the Australian Revolving Letter of Credit), 2.25% per
annum for loans under the Term Loan B Facility and .75% per annum for base
rate loans, which may only be made under the Term Loan A Facility and the
Revolving Credit Facility (other than the Australian Term Letter of Credit and
the Australian Revolving Letter of Credit). The applicable margins may
increase to as high as 2.0% per annum or reduce ultimately to as low as .75%
per annum in the case of LIBOR loans and Bank Swap Reference Rate loans, as
the case may be, under the Term Loan A Facility and the Revolving Credit
Facility (including the Australian Term Letter of Credit and the Australian
Revolving Letter of Credit), increase to as high as 2.5% per annum or reduce
to as low as 1.75% per annum in the case of loans under the Term Loan B
Facility and increase to as high as 1.0% per annum or reduce to as low as 0.0%
per annum in the case of base rate loans, in each case based upon improved
credit measures. The Term Loan A Facility and the Australian term loan will
mature on the date which is six years
76
<PAGE>
after the Closing Date, and the Term Loan B Facility will mature on the date
which is seven years after the Closing Date. Amounts outstanding under the
Term Loan Facilities will amortize on a semi-annual basis beginning at the end
of the second full fiscal quarter after the Closing Date. Aggregate principal
payments will be $11.0 million, $16.0 million and $21.0 million for the years
1998, 1999 and 2000, respectively, increasing to a maximum of $45.0 million in
2003.
Fees. The Company will be required to pay the lenders, on a quarterly basis,
a commitment fee initially equal to .375% per annum (which may be increased or
reduced based upon credit measures) on the undrawn portion of the Revolving
Credit Facility and a commitment fee initially equal to .375% per annum on the
undrawn portion of the Term Loan A Facility. The Company is also obligated to
pay: (i) a per annum letter of credit fee equal to the applicable margin for
LIBOR based loans on the aggregate amount of outstanding letters of credit,
including the Australian Term Letter of Credit and the Australian Revolving
Letter of Credit; provided the Australian Revolving Letter of Credit fee will
be based on the daily average outstanding amount of loans under the Australian
revolving facility; (ii) a facing fee for the letter of credit issuing bank;
and (iii) agent, arrangement and other similar fees.
Prepayments. The Term Loan Facilities are required to be prepaid with (a)
100% of the net proceeds (including casualty insurance proceeds) of asset
sales and other asset dispositions for proceeds in excess of a certain
threshold to be mutually agreed (subject to customary exceptions for
inventory, used or obsolete equipment, etc. and to an exclusion for a
specified amount of reinvestments of such proceeds in agreed categories of
assets), (b) 100% of the net proceeds of the issuance or incurrence of debt or
of any sale and lease-back for proceeds in excess of a certain threshold to be
mutually agreed, and (c) 50% of the net proceeds from any issuance of equity
securities in any public offering or private placement or from any capital
contribution (other than net proceeds received upon exercise of employee stock
options, the sale of shares pursuant to the Koppers Industries, Inc. Employee
Stock Purchase Plan and the Koppers Industries, Inc. Stock Redemption and
Purchase Plan, or the resale of shares to Management Investors).
Covenants. The New Credit Facilities contain a number of covenants
including, among other things, limitation on liens; limitation on indebtedness
and guarantees; limitation on loans and investments; limitations on dividends
and stock repurchases to specified amounts; limitation on optional payments
and modification of certain indebtedness; limitation on leases; limitation on
fundamental changes; limitation on disposition of assets and stock and
indebtedness of subsidiaries; limitations on transactions with affiliates;
limitation on discontinuance or changes in business (including acquisitions);
limitation on capital expenditures; limitation on filing certain consolidated
tax returns; limitation on use of proceeds from loans; limitation on the
amendment of certain documents; limitation on certain actions with respect to
pension and benefit plans; limitation on restrictions on liens and dividend
restrictions on subsidiaries. In addition, the New Credit Facilities require
that the Company comply with specified ratios and tests, including minimum net
worth (deficit) on and after December 31, 1997 of not less than $(40) million,
subject to upward adjustment, which amount shall be increased by 50% of the
Company's cumulative consolidated net income on a quarterly basis plus 100% of
the proceeds from equity issuances; capital expenditures not to exceed $35
million annually plus up to 50% of the previous year's permitted capital
expenditures to the extent such amounts were not expended in such previous
year; ratio of total debt to consolidated EBITDA of 4.80 to 1.00 initially
decreasing to 3.50 to 1.00; interest coverage ratio of 2.25 to 1.00 initially
increasing to 3.00 to 1.00; consolidated debt service coverage ratio of 1.75
to 1.00 initially decreasing to 1.25 to 1.00 and consolidated current ratio at
the end of any fiscal year to be not less than 1.10 to 1.00.
Events of Default. Events of Default under the New Credit Facilities include
non-payment of principal, interest, fees or other amounts when due; violation
of covenants; failure of any representation or warranty to be true in all
material respects; cross-default and cross-acceleration; Change in Control (as
defined in the New Credit Facilities); bankruptcy and insolvency events with
respect to the Company or a guarantor; material judgments; ERISA events; and
actual or asserted (by the Company or a guarantor) invalidity of any loan
document or security interest.
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DESCRIPTION OF NOTES
The New Notes, like the Old Notes, will be issued pursuant to the Indenture,
dated December 1, 1997, between the Company and PNC Bank, National Association
(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 (the "Trust Indenture Act"). The terms of the New Notes are
substantially identical to the Old Notes in all material respects (including
interest rate and maturity), except that (i) the New Notes will not be subject
to the restrictions on transfer (other than with respect to holders that are
broker-dealers, persons who participated in the distribution of the Old Notes
or affiliates) and (ii) the Registration Rights Agreement covenants regarding
registration and the related Liquidated Damages (other than those that have
accrued and were not paid) with respect to Registration Defaults will have
been deemed satisfied. The Notes are subject to all such terms, and holders of
Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summaries of certain provisions of the
Indenture do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the Indenture,
including the definitions of certain terms therein. Wherever particular
Sections or defined terms of the Indenture not otherwise defined herein are
referred to, such Sections or defined terms shall be incorporated herein by
reference. A copy of the form of Indenture will be made available to any
prospective purchaser of the Notes upon request to the Company.
GENERAL
The Notes mature on December 1, 2007. The Notes are limited to $175,000,000
in aggregate principal amount. Each Note bears interest at the rate per annum
shown on the front cover of this Prospectus from December 1, 1997, or from the
most recent date to which interest has been paid or provided for, payable
semi-annually (to Holders of record at the close of business on May 15 or
November 15 immediately preceding such interest payment date) on June 1 and
December 1 of each year, commencing June 1, 1998.
The Notes are issued only in fully registered form, without interest
coupons, and in denominations of $1,000 of principal amount and any integral
multiple thereof. No service charge will be made to a Holder for any
registration of transfer, exchange or redemption of Notes, but the Company may
require payment sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
RANKING
The Notes are general unsecured obligations of the Company and rank junior
to, and are subordinated in right of payment to, all existing and future
Senior Debt of the Company, pari passu in right of payment with all senior
subordinated Debt of the Company (except as to secured Debt) and senior in
right of payment to all Subordinated Debt of the Company. In addition, the
Notes are effectively subordinated to all secured obligations to the extent of
the assets securing such obligations. At September 30, 1997, on a pro forma
basis after giving effect to the Saratoga Investment and the Recapitalization,
the Company would have had $175,000,000 Senior Debt outstanding, all of which
would have been secured. All Debt incurred under the New Credit Facilities
will be Senior Debt of the Company and will be secured by substantially all of
the assets of the Company.
Except as described in "Change of Control," the Indenture does not contain
any provision that would provide protection to the holders of the Notes
against a sudden and dramatic decline in credit quality resulting from a
takeover, recapitalization or similar restructuring of the Company. If a
Change of Control were to occur, there can be no assurance that the Company
would have adequate funds to repurchase the Notes as required by the Indenture
and/or that the lenders under the New Credit Facilities will permit such
repurchase. See "--Covenants--Change of Control" and "Description of New
Credit Facilities--Events of Default."
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or in part, at
any time on or after December 1, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first class
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mail to each Holder's last address as it appears in the registry books, at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the 12-month period beginning December 1, of the years
indicated:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002..................................................... 104.938%
2003..................................................... 103.292%
2004..................................................... 101.646%
2005 and thereafter...................................... 100.000%
</TABLE>
plus accrued and unpaid interest, if any, to the date of such redemption.
In addition, at any time prior to December 1, 2000, the Company may, at its
option, redeem up to 35% of the aggregate principal amount of Notes with the
net proceeds of one or more issuances of Common Stock (other than Redeemable
Stock) at a redemption price (expressed as a percentage of principal amount)
of 109.875% plus accrued interest, if any, to the date of such redemption;
provided that at least $100,000,000 aggregate principal amount of Notes would
remain outstanding after giving effect to any such redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in such manner as it will deem appropriate and
fair; provided, however, that no Note of $1,000 in original principal amount
or less will be redeemed in part.
SUBORDINATION OF THE NOTES
The payment of the principal of and interest or liquidated damages 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
Debt, which shall include, for all purposes described in this "Subordination
of the Notes" heading, the cash collateralization in full of all outstanding
letters of credit constituting Senior Debt.
Upon any payment or distribution of assets or securities of the Company of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any
payment (a "Defeasance Trust Payment") from the trust described under
"Defeasance" (a "Defeasance Trust")), upon any dissolution or winding-up or
total liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings,
all Senior Debt shall first be paid in full in cash before the Holders of the
Notes or the Trustee on behalf of such Holders shall be entitled to receive
any payment by the Company of the principal of or interest or liquidated
damages on the Notes, or any payment by the Company to acquire any of the
Notes for cash, property or securities, or any distribution by the Company
with respect to the Notes of any cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any
Defeasance Trust Payment). Before any payment may be made by, or on behalf of,
the Company of the principal of or interest or liquidated damages on the Notes
upon any such dissolution or winding-up or total liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), to which the Holders of the Notes or
the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Debt (pro rata
to such holders on the basis of the respective amounts of Senior Debt held by
such holders) or their representatives or to the trustee or trustees or agent
or agents under any agreement or indenture pursuant to which any of such
Senior Debt may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Senior Debt in full in cash after giving
effect to any prior or concurrent payment, distribution or provision therefor
to or for the holders of such Senior Debt. In the event that, notwithstanding
the foregoing, the Trustee or any holder of Notes receives any payment or
distribution of assets of the Company of any kind, whether in cash, property
or securities, including, without limitation, by way of set-off or otherwise,
in respect
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of the Notes before all Senior Debt of the Company is paid in full in cash,
then such payment or distribution will be held by the recipient in trust for
the benefit of holders of Senior Debt and will be immediately paid on or
delivered to the holders of Senior Debt or their representative or
representatives to the extent necessary to make payment in full in cash of all
Senior Debt remaining unpaid, after giving effect to any concurrent or
distribution, or provision therefor, to or for the holders of Senior Debt.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment but
including the establishment of a Defeasance Trust) by or on behalf of the
Company of principal of or interest or liquidated damages on the Notes, or for
or on account of the purchase, redemption or other acquisition of the Notes by
or on behalf of the Company, whether pursuant to the terms of the Notes, upon
acceleration, pursuant to an Offer (as defined herein), a Change of Control
Offer (as defined herein) or otherwise, will be made (including, without
limitation, by way of set-off) if, at the time of such payment, there exists a
default in the payment of all or any portion of the obligations on any
Designated Senior Debt, whether at maturity, on account of mandatory
redemption or prepayment, acceleration or otherwise, and such default shall
not have been cured or waived or the benefits of this sentence waived by or on
behalf of the holders of such Designated Senior Debt. In addition, during the
continuance of any non-payment event of default with respect to any Designated
Senior Debt pursuant to which the maturity thereof may be immediately
accelerated, and upon receipt by the Trustee of written notice (a "Payment
Blockage Notice") from the holder or holders of such Designated Senior Debt or
the trustee or agent acting on behalf of the holders of such Designated Senior
Debt, then, unless and until such event of default has been cured or waived or
has ceased to exist or such Designated Senior Debt has been discharged or
repaid in full in cash or the benefits of these provisions have been waived by
the holders of such Designated Senior Debt, no direct or indirect payment
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment but including the establishment of the
Defeasance Trust) will be made (including, without limitation, by way of set-
off) by or on behalf of the Company of principal of or interest or liquidated
damages on the Notes, or for or on account of the purchase, redemption or
other acquisition of the Notes by or on behalf of the Company, to such
Holders, during a period (a "Payment Blockage Period") commencing on the date
of receipt of such notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything in the subordination provisions of the Indenture or
the Notes to the contrary, (x) in no event will a Payment Blockage Period
extend beyond 179 days from the date the Payment Blockage Notice in respect
thereof was given, and (y) not more than one Payment Blockage Period may be
commenced with respect to the Notes during any period of 360 consecutive days.
No event of default that existed or was continuing on the date of commencement
of any Payment Blockage Period with respect to the Designated Senior Debt
initiating such Payment Blockage Period (to the extent the holder of
Designated Senior Debt, or trustee or agent, giving notice commencing such
Payment Blockage Period had knowledge of such existing or continuing event of
default) may be, or be made, the basis for the commencement of any other
Payment Blockage Period by the holder or holders of such Designated Senior
Debt or the trustee or agent acting on behalf of such Designated Senior Debt
whether or not within a period of 360 consecutive days, unless such event of
default has been cured or waived for a period of not less than 90 consecutive
days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes" heading will not be construed as preventing the
occurrence of any Event of Default in respect of the Notes. See "Events of
Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of the Company, funds which would otherwise be payable to Holders
of the Notes will be paid to the holders of Senior Debt to the extent
necessary to pay the Senior Debt in full in cash, and the Company may be
unable to meet fully its obligations with respect to the Notes.
At the time of issuance of the Old Notes, loans outstanding under the New
Credit Facilities were the only outstanding Senior Debt. Subject to the
restrictions set forth in the Indenture, in the future the Company may issue
additional Senior Debt to refinance existing Debt or for other corporate
purposes.
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GUARANTEES OF THE NOTES
The Indenture provides that each of the Subsidiary Guarantors will
unconditionally guarantee on a joint and several, senior subordinated basis
all of the Company's obligations under the Notes, including its obligations to
pay principal and interest with respect to the Notes. The Subsidiary
Guarantors also guaranteed all obligations of the Company under the New Credit
Facilities, and each Subsidiary Guarantor granted a security interest in
substantially all its assets to secure the obligations under the New Credit
Facilities.
The obligations of each Subsidiary Guarantor are limited to the maximum
amount which, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under its Subsidiary Guarantee or pursuant to its contribution obligations
under the Indenture, will result in the obligations of such Subsidiary
Guarantor under its Subsidiary Guarantee not constituting a fraudulent
conveyance or fraudulent transfer under Federal or state law. Each Subsidiary
Guarantor that makes a payment or distribution under a Subsidiary Guarantee
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount, based on the net assets of each Subsidiary Guarantor
determined in accordance with GAAP. Except as provided in "--Covenants" below,
the Company is not restricted from selling or otherwise disposing of any of
the equity interests of the Subsidiary Guarantors.
The Indenture provides that each of the Company's Subsidiaries formed or
acquired after the date of issuance of the Notes that provides a Guarantee
under the New Credit Facilities will be required to be a Subsidiary Guarantor.
The Company will cause each Subsidiary required to issue a Subsidiary
Guarantee after the date of issuance of the Notes to (i) execute and deliver
to the Trustee a supplemental indenture in form reasonably satisfactory to the
Trustee pursuant to which such Subsidiary shall become a party to the
Indenture and thereby unconditionally guarantee all of the Company's
Obligations under the Notes and the Indenture on the terms set forth therein
and (ii) deliver to the Trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and constitutes a legal, valid, binding and enforceable obligation of such
Subsidiary (which opinion may be subject to customary assumptions and
qualifications). Thereafter, such Subsidiary shall (unless released in
accordance with the terms of this Indenture) be a Subsidiary Guarantor for all
purposes of the Indenture.
The Indenture provides that if the Notes thereunder are defeased in
accordance with the terms of the Indenture, or if, subject to the requirements
of the first paragraph under "Consolidation, Merger and Sale of Assets," all
or substantially all of the assets of any Subsidiary Guarantor or all of the
equity interests of any Subsidiary Guarantor are sold (including by issuance
or otherwise) by the Company in a transaction constituting an Asset
Disposition, and if (x) the Net Cash Proceeds from such Asset Disposition are
used in accordance with the covenant described under "--Covenants--Limitation
on Asset Disposition" or (y) the Company delivers to the Trustee an Officers'
Certificate to the effect that the Net Cash Proceeds from such Asset
Disposition shall be used in accordance with the covenant described under "--
Covenants--Limitation on Asset Disposition" and within the time limits
specified by such covenant, then such Subsidiary Guarantor (in the event of a
sale or other disposition of all of the equity interests of such Subsidiary
Guarantor) or the corporation acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Subsidiary
Guarantor) shall be released and discharged of its Subsidiary Guarantee
obligations in respect of the Indenture and the Notes.
The Subsidiary Guarantees are joint and several, general unsecured
obligations of the Subsidiary Guarantors. The respective obligations of each
Subsidiary Guarantor under its Subsidiary Guarantee are subordinated and
junior in right of payment to the prior payment in full of all existing and
future Guarantor Senior Debt of such Subsidiary Guarantor, as the case may be,
to substantially the same extent as the Notes are subordinated to all existing
and future Senior Debt of the Company. No separate financial statements of any
of the Subsidiary Guarantors are presented herein, except for Koppers
Australia, as management believes that such financial statements would not
provide any additional meaningful information.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
"Acquisition Debt" means Debt of any Person existing at the time such Person
became a Subsidiary of the Company (or such Person is merged into the Company
or one of its Subsidiaries) or assumed in connection with the acquisition of
assets from any such Person (other than assets acquired in the ordinary course
of business), including Debt Incurred in connection with, or in contemplation
of, such Person becoming a Subsidiary of the Company (or such Person being
merged into the Company or one of its Subsidiaries) (but excluding Debt of
such Person which is extinguished, retired or repaid in connection with such
Person becoming a Subsidiary of the Company).
"Affiliate" of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, no Person (other than the Company or any Subsidiary of the Company)
in whom a Receivables Subsidiary makes an investment solely in connection with
a Receivables Transaction shall be deemed to be an Affiliate of the Company or
any of its Subsidiaries with respect to such investment (but may be deemed an
Affiliate with respect to other transactions, if applicable).
"Approved Government Financing" means below-market interest rate financing
provided by or through any governmental or quasi-government subdivision,
agency, office or instrumentality or pursuant to any government approved or
supported loan program.
"Asset Acquisition" means (i) an investment by the Company or any of its
Subsidiaries in any other Person pursuant to which such Person will become a
Subsidiary of the Company or will be merged with the Company or any of its
Subsidiaries or (ii) the acquisition by the Company or any of its Subsidiaries
of the assets of any Person which constitute substantially all of an operating
unit or business of such Person.
"Asset Disposition" means, with respect to any Person, any sale, transfer,
conveyance, lease or other disposition (including, without limitation, by way
of merger, consolidation or sale-leaseback) by such Person or any of its
Subsidiaries to any Person (other than to such Person or a Wholly-Owned
Subsidiary of such Person and other than in the ordinary course of business)
of (i) any assets of such Person or any of its Subsidiaries or (ii) any shares
of Capital Stock of such Person's Subsidiaries. For purposes of this
definition, any disposition in connection with directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall not
constitute an Asset Disposition. For purposes of this definition, the term
"Asset Disposition" will not include any sale, transfer, conveyance, lease or
other disposition of assets and properties of the Company that is governed by
the provision described in "Consolidation, Merger and Sale of Assets."
"Attributable Debt" means, with respect to any Sale and Leaseback
Transaction, at the date of determination, the present value (discounted at
the rate of interest implicit in the terms of the lease) of the obligation of
the lessee for net rental payments during the remaining term of the lease
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended). "Net rental payments" under any lease for
any period means the sum of such rental and other payments required to be paid
in such period by the lessee thereunder, not including, however, any amount
required to be paid by such lessee (whether or not designated as rent or
additional rent) on account of maintenance and repairs, insurance, taxes,
assessments, water rates or similar charges required to be paid by such lessee
thereunder or any amounts required to be paid by such lessee thereunder
contingent upon the amount of sales, maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges.
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"Board of Directors" means either the Board of Directors of the Company or
any committee of such Board duly authorized to act under the Indenture.
"Business Day" means a day which in the city (or in any of the cities, if
more than one) where amounts are payable in respect of the Notes, as specified
on the face of the form of Note recited above, and where the Corporate Trust
Office is located, is neither a legal holiday nor a day on which banking
institutions are authorized by law or regulation to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity interests whether now outstanding or issued
after the date of the Indenture, including, without limitation, all Common
Stock and all Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) the rental obligations of such
Person as lessee under which, in conformity with generally accepted accounting
principles, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligation" means, as applied to any Person, the rental
obligation required to be capitalized on the balance sheet of such Person
under any Capitalized Lease of such Person.
"Cash Equivalents" means, at any time, (i) Debt with a maturity of one year
or less issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full faith
and credit of the United States is pledged in support thereof), (h)
certificates of deposit or acceptances with a maturity of one year or less of
any financial institution that is a member of the Federal Reserve System
having combined capital and surplus and undivided profits of not less than
$500,000,000, (iii) commercial paper with a maturity of 270 days or less
issued by a corporation (except an Affiliate of the Company) organized under
the laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's, (iv) repurchase
agreements with institutions described in clause (ii) with respect to
investments
described in clause (i), (v) market auction preferred stock rated in the
highest rating by S&P and Moody's and (vi) money market mutual funds rated in
the highest rating by S&P and Moody's or investing solely in investments
described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than one or more Permitted Holders, 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 shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event
or otherwise), directly or indirectly, of more than 50% of the total voting
power of the then outstanding Common Stock of the Company; (ii) the Company
consolidates with, or merges with or into, another Person or the Company or
its Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of
all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) to any Person, other than any such
transaction where immediately after such transaction the Person or Persons
that "beneficially owned" (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) immediately prior to such transaction, directly or indirectly, the then
outstanding Common Stock of the Company "beneficially own" (as so determined),
directly or indirectly, a majority of the total voting power of the then
outstanding Common Stock of the surviving or transferee Person; or (iii)
following the first public offering of Common Stock of the Company, during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (which, for purposes of the
definition of "Change of Control," shall not include any committee thereof) of
the Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of a majority of the directors of the
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Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding
or issued after the date of the Indenture, and includes, without limitation,
all series and classes of such common stock.
"Consolidated Capital Expenditures" means, for any period, the aggregate of
all expenditures incurred (whether paid in cash or accrued as liabilities and
including Capitalized Lease Obligations) by the Company and its Subsidiaries
during such period that, in conformity with generally accepted accounting
principles, are included as capital expenditures in the consolidated statement
of cash flows of the Company and its Consolidated Subsidiaries.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate (without duplication) of (i) Consolidated Interest Expense and (ii)
the interest attributable to Capitalized Leases, determined on a consolidated
basis for such Person and its Consolidated Subsidiaries for such period in
accordance with generally accepted accounting principles of such Person.
"Consolidated Fixed Charge Ratio" means the ratio, on a pro forma basis, of
(i) the aggregate amount of EBITDA of any Person for the Reference Period
immediately prior to the Determination Date to (ii) the aggregate Consolidated
Fixed Charges of such Person during such Reference Period; provided that for
purposes of such computation, in calculating EBITDA and Consolidated Fixed
Charges, (1) the Incurrence of the Debt giving rise to the need to calculate
the Consolidated Fixed Charge Ratio and the application of the proceeds
therefrom will be assumed to have occurred on the first day of the Reference
Period, (2) Asset Dispositions and
Asset Acquisitions which occur during the Reference Period or subsequent to
the Reference Period and prior to the Determination Date (but including any
Asset Acquisition to be made with the Debt Incurred pursuant to (1) above)
will be assumed to have occurred on the first day of the Reference Period, (3)
the Incurrence of any Debt during the Reference Period or subsequent to the
Reference Period and prior to the Determination Date and the application of
the proceeds therefrom will be assumed to have occurred on the first day of
such Reference Period, (4) Consolidated Interest Expense attributable to any
Debt (whether existing or being Incurred) computed on a pro forma basis and
bearing a floating interest rate will be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period
unless such Person or any of its Subsidiaries is a party to an Interest Rate
Agreement (which will remain in effect for the twelve month period after the
Determination Date) which has the effect of fixing the interest rate on the
date of computation, in which case such rate (whether higher or lower) will be
used and (5) there will be excluded from Consolidated Fixed Charges any
Consolidated Fixed Charges related to any Debt which was outstanding during
and subsequent to the Reference Period but is not outstanding on the
Determination Date, except for Consolidated Fixed Charges actually incurred
with respect to Debt borrowed (as adjusted pursuant to clause (4)) under a
revolving credit or similar arrangement to the extent the commitment
thereunder remains in effect on the Determination Date. For the purposes of
making the computation referred to above, Asset Dispositions and Asset
Acquisitions which have been made by any Person which has become a Subsidiary
of the Company or been merged with or into the Company or any Subsidiary of
the Company during the Reference Period or subsequent to the Reference Period
and prior to the Determination Date will be calculated on a pro forma basis
(including all of the calculations referred to in numbers (1) through (5)
above) assuming such Asset Dispositions or Asset Acquisitions occurred on the
first day of the Reference Period.
"Consolidated Interest Expense" of any Person means, for any period, without
duplication, the sum of the interest expense on all Debt of such Person and
its Consolidated Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP and including, without limitation, (i) imputed
interest on Capitalized Lease Obligations and Attributable Debt, (ii)
commissions, discounts and other fees and charges owed with respect to letters
of credit securing financial obligations and bankers' acceptance financing,
(iii)
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amortization of other financing fees and expenses, (iv) the interest portion
of any deferred payment obligations, (v) amortization of debt discount or
premium, if any, (vi) all other non-cash interest expense, (vii) capitalized
interest, (viii) all interest payable with respect to discontinued operations,
and (ix) all interest on any Debt of any other Person guaranteed by the
referent Person or any of its Consolidated Subsidiaries.
"Consolidated Net Income" of any Person for any period means the Net Income
of such Person and its Consolidated Subsidiaries for such period, determined
on a consolidated basis in accordance with generally accepted accounting
principles; provided that there will be excluded (i) the Net Income of any
Person, other than a Consolidated Subsidiary, in which such Person or any of
its Consolidated Subsidiaries has a joint interest with a third party except
to the extent of the amount of dividends or distributions actually paid to
such Person or a Consolidated Subsidiary during such period, (ii) except to
the extent includible pursuant to the foregoing clause (i), the Net Income of
any Person accrued prior to the date it becomes a Subsidiary of such Person or
is merged into or consolidated with such Person or any of its Subsidiaries or
that Person's assets are acquired by such Person or any of its Subsidiaries;
provided that clause (ii) will not be effective for any calculation of the
Consolidated Fixed Charge Ratio, (iii) the Net Income (if positive) of any
Subsidiary to the extent that the declaration or payment of dividends or
similar distributions by that Subsidiary to the Company of such Net Income is
not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any gains or losses
attributable to Asset Dispositions and (v) without duplication, any
extraordinary gains or losses realized during such period, including any
related tax effects on such Person.
"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with generally accepted
accounting principles, should be, accounted for by such Person as a
consolidated subsidiary.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Debt" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or
bankers' acceptance or other similar instruments (or reimbursement obligations
with respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, except Trade Payables, (v) all
obligations of such Person as lessee under Capitalized Leases, (vi) all Debt
of others secured by a Lien on any asset of such Person, whether or not such
Debt is assumed by such Person provided that, for purposes of determining the
amount of any Debt of the type described in this clause, if recourse with
respect to such Debt is limited to such asset, the amount of such Debt will be
limited to the fair market value of such asset, (vii) all Debt of others
Guaranteed by such Person, (viii) obligations under Currency Agreements and
Interest Rate Agreements (the "principal amount" of which shall be the amount
then payable by such Person upon termination thereof due to default by such
Person) and (ix) the Attributable Debt with respect to any Sale and Lease Back
Transaction.
"Designated Senior Debt" means any Debt outstanding under the New Credit
Facilities.
"Determination Date" means the date of the transaction giving rise to the
need to make a calculation required by certain of the covenants included in
the Indenture.
"EBITDA" of any Person for any period means the Consolidated Net Income of
such Person plus, in each case to the extent deducted in determining
Consolidated Net Income for such period, (i) income taxes (other than income
taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (ii) Consolidated Fixed
Charges, (iii) depreciation and amortization expense and (iv) all other non-
cash items reducing Consolidated Net Income for such period, minus all non-
cash items increasing Consolidated Net Income for such period, all determined
on a consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with generally accepted accounting principles.
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"Event of Default" means any event or condition specified as such in "Event
of Default" which will have continued for the period of time, if any, therein
designated.
"GAAP" or "generally accepted accounting principles" means generally
accepted accounting principles in the United States as in effect as of the
date of the Indenture, including, without limitation, those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting
profession.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation of such other Person (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Debt or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part), provided that the term Guarantee will not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Debt" means, with respect to any Subsidiary Guarantor, at
any date, (a) all Obligations, if any, of such Subsidiary Guarantor under the
New Credit Facilities; (b) all Obligations of such Subsidiary Guarantor under
Currency Agreements and Interest Rate Agreements (including Post-Petition
Interest); (c) all Obligations of such Subsidiary Guarantor under stand-by
letters of credit; and (d) all other Debt of such Subsidiary Guarantor for
borrowed money, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Debt unless the instrument under which such
Debt of such Subsidiary Guarantor for money borrowed is Incurred expressly
provides that such Debt for money borrowed is not senior or superior in right
of payment to such Subsidiary Guarantor's Subsidiary Guarantee, and all
renewals, extensions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, Guarantor Senior Debt shall not include (a) to
the extent that it may constitute Debt, any Obligation for Federal, state,
local or other taxes; (b) any Debt among or between such Subsidiary Guarantor
and any Subsidiary of such Subsidiary Guarantor; (c) to the extent that it may
constitute Debt, any Obligation in respect of any trade payable Incurred for
the purchase of goods or materials, or for services obtained, in the ordinary
course of business; (d) Debt evidenced by such Subsidiary Guarantor's
Subsidiary Guarantee; (e) Debt of such Subsidiary Guarantor that is expressly
subordinate or junior in right of payment to any other Debt of such Subsidiary
Guarantor; (f) to the extent that it may constitute Debt, any obligation owing
under leases (other than Capitalized Lease Obligations); and (g) any
obligation that by operation of law is subordinate to any general unsecured
obligations of such Subsidiary Guarantor.
"Hickson" means Koppers-Hickson Investments Pty. Limited and its wholly-
owned subsidiaries.
"Holder," "Holder of Notes," "Noteholder" or other similar terms means the
registered holder of any Note.
"Incurrence" means the incurrence, creation, assumption or in any other
manner becoming liable with respect to, or becoming responsible for the
payment of, any Debt. "Incur" will have a comparable meaning.
"Independent Financial Advisor" means a nationally recognized investment
banking, accounting or appraisal firm (i) which does not (and whose directors,
officers, employees and Affiliates do not) have a direct or indirect material
financial interest in the Company or any of its Subsidiaries and (ii) which,
in the sole judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which such firm is being
engaged.
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"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement, to or under which the Company or
any of its Subsidiaries is a party or a beneficiary on the date of the
Indenture or becomes a party or a beneficiary thereafter.
"Investment" means any investment in any Person, whether by means of share
purchase, capital contribution, loan, time deposit or otherwise (but not
including any demand deposit).
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For the purposes of the Indenture, the Company will be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" from an Asset Disposition means cash or Cash Equivalents
received (including any cash or Cash Equivalents received by way of deferred
payment of principal pursuant to, or upon disposition of, a note or
installment receivable or otherwise, but only as and when received (including
any cash or Cash Equivalents received upon sale or disposition of such note or
receivable), and excluding any other consideration (i) received in the form of
assumption by the acquiring Person of Debt or other obligations relating to
the assets disposed of in such Asset Disposition or (ii) until converted to
cash or Cash Equivalents, received in any other non-cash form) therefrom, in
each case, net of all legal, accounting and investment banking fees and
expenses, brokerage commissions and other fees and expenses incurred, and
provision for all taxes (whether or not such taxes will actually be paid or
payable) as a result of such Asset Disposition without regard to the
consolidated results of operation of the Company and its Subsidiaries as a
consequence of such Asset Disposition, transfer or other disposition, in each
case net of a reasonable reserve for the after-tax cost of any indemnification
payments (fixed and contingent) attributable to seller's indemnities to the
purchaser undertaken by the Company or any of its Subsidiaries in connection
with such Asset Disposition (but excluding any payments, which by the terms of
the indemnities will not, under any circumstances, be made during the term of
the Notes), and net of all payments made on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which is required to be repaid as a result of such Asset
Disposition. Notwithstanding the foregoing, the term "Net Cash Proceeds" will
not include 50% of that portion of the net after tax cash proceeds from the
sale, transfer, conveyance, lease or other disposition of the Monessen
Facility that is directly attributable to the tax credits available under
Internal Revenue Code Section 29 (the "Monessen Section 29 Tax Credits")
associated with the operations of the Monessen Facility.
"Net Income" of any Person for any period means the net income (loss) of
such Person for such period, determined in accordance with generally accepted
accounting principles, except that extraordinary and nonrecurring gains and
losses as determined in accordance with generally accepted accounting
principles will be excluded.
"Net Worth" of any Person means as of any date the aggregate of capital,
surplus and retained earnings of such Person and its Consolidated Subsidiaries
as would be shown on a consolidated balance sheet of such Person and its
Consolidated Subsidiaries prepared as of such date in accordance with
generally accepted accounting principles; provided that capital and surplus
attributable to Redeemable Stock will be excluded.
"New Credit Facilities" means the Credit Agreement by and among the Company,
the guarantors listed therein, the lenders listed therein, and SBC Warburg
Dillon Read Inc., Swiss Bank Corporation, and Mellon
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Bank, N.A., as Agents, as such agreement may be amended, restated,
supplemented or otherwise modified from time to time, and includes (i) the
Australian dollar denominated term loan and revolving credit facility
described therein, (ii) any credit, securities purchase or similar agreement
extending the maturity of, or restructuring all or any portion of, the Debt
under the New Credit Facilities or any successor agreement and (iii) any
agreement with one or more lenders or purchasers refinancing all or any
portion of the Debt under the New Credit Facilities or any successor
agreement, including, in the case of clauses (ii) or (iii), any increased
amount of Debt thereunder but only to the extent such increased amount of Debt
is permitted to be incurred under clause (viii) of the first paragraph under
the "Limitation on Debt" covenant described below.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages (including liquidated damages) and other liabilities
payable under the documentation governing any Debt.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors or the President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and by the Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Trustee. Each such certificate
will comply with Section 314 of the Trust Indenture Act of 1939.
"Opinion of Counsel" means an opinion in writing signed by legal counsel who
may be an employee of or counsel to the Company or who may be other counsel
satisfactory to the Trustee. Each such opinion will comply with Section 314 of
the Trust Indenture Act of 1939.
"Permitted Debt" means Debt described in clauses (i) through (xiv) of the
"Limitations on Debt" covenant described below.
"Permitted Holders" means Saratoga Partners III, LP and its affiliates and
the Management Investors, each of the spouses, children (adoptive or
biological) or other lineal descendants of the Management Investors, the
probate estate of any such individual and any trust, so long as one or more of
the foregoing individuals retains substantially all of the controlling or
beneficial interest thereunder.
"Permitted Junior Securities" means any securities of the Company, any
Subsidiary Guarantor or any successor to the Company or any Subsidiary
Guarantor, as the case may be, issued pursuant to a plan of reorganization or
readjustment of the Company of such Subsidiary Guarantor that are (i) equity
securities without covenants or rights of mandatory or optional redemption or
(ii) subordinated in right of payment to all Senior Debt or Guarantor Senior
Debt, as the case may be, that may at the time be outstanding, to
substantially the same extent as, or to a greater extent than, the Notes are
subordinated as provided in the Indenture, in any event pursuant to a court
order so providing and as to which (a) the rate of interest on such securities
shall not exceed the effective rate of interest on the Notes on the date of
the Indenture, (b) such securities shall not be entitled to the benefits of
covenants or defaults materially more beneficial to the holders of such
securities than those in effect with respect to the Notes on the date of the
Indenture and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior
to the date six months following the final scheduled maturity date of the
Senior Debt or Guarantor Senior Debt, as the case may be, (as modified by the
plan of reorganization of readjustment pursuant to which such securities are
issued).
"Permitted Liens" means (i) Liens securing Debt existing as of the date of
issuance of the Notes (after giving effect to the use of proceeds of issuance
of the Notes), and related interest, fees and obligations of the Company
thereunder; (ii) Liens with respect to assets of a Subsidiary granted by such
Subsidiary to the Company to secure Debt owing to the Company; (iii) statutory
Liens or 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 will be required in conformity with GAAP will have been
made therefor; (iv) Liens for taxes, assessments, government charges or claims
which are being contested in good faith
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by appropriate proceedings promptly instituted and diligently conducted and if
a reserve or other appropriate provision, if any, as will be required in
conformity with GAAP will have been made therefor; (v) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (vi)
Liens created or 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 Debt); (vii) easements, rights-of-way, restrictions and other
similar charges or encumbrances not interfering in any material respect with
the business of the Company or any of its Subsidiaries incurred in the
ordinary course of business; (viii) any attachment or judgment Lien that does
not give rise to an Event of Default; (ix) rights of banks to set off deposits
against debts owed to said bank; (x) Liens on the assets of any entity
existing at the time such assets are acquired by the Company or any of its
Subsidiaries, whether by merger, consolidation, purchase of assets or
otherwise; provided that such Liens (A) are not created, incurred or assumed
in connection with, or in contemplation of, such assets being acquired by the
Company or any of its Subsidiaries and (B) do not extend to any other Property
of the Company or any of its Subsidiaries; (xi) Liens securing reimbursement
obligations with respect to letters of credit which encumber documents and
goods sold relating to such letters of credit and the products and proceeds
thereof; (xii) 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; (xiii) Liens encumbering property or assets under
construction arising from progress or partial payments by a customer of the
Company or one of its Subsidiaries relating to such property or assets; (xiv)
any interest or title of a lessor in the property subject to any Capitalized
Lease or operating lease; provided that any Sale and Leaseback Transaction
related thereto complies with provisions described in "Limitations on Sale and
Leaseback Transaction"; (xv) Liens upon real or tangible personal property
acquired after the date on which the Notes are issued under the Indenture;
provided, however, that (x) such Lien is created solely for the purpose of
securing Debt Incurred (A) to finance the cost (including the cost of
improvement or construction) of the item of property or assets subject thereto
and such Lien is created prior to, at the time of or within 12 months after
the later of the acquisition, the completion of construction or the
commencement of full operation of such property or (B) to refinance any Debt
previously so secured, (y) the principal amount of the Debt secured by such
Lien does not exceed 100% of such cost and (z) any such Lien will not extend
to or cover any property or assets other than such item or property or assets
and any improvements on such item; (xvi) Liens securing obligations under
Interest Rate Agreements and Currency Agreements; (xvii) Liens on accounts
receivable and inventory securing working capital borrowings (including
interest, fees and other obligations in respect thereof) made by the Company
or its Subsidiaries in accordance with the provisions described in
"Limitations on Debt"; (xviii) Liens on the Assets of a Receivables Subsidiary
in a Receivables Transaction; and (xix) any extension, renewal or replacement,
in whole or in part, of any Lien described in the foregoing clauses (i), (x)
and (xv): provided that any such extension, renewal or replacement will not
extend to any other assets of the Company or any of its Subsidiaries other
than the assets originally covered by such Lien or any improvements thereon or
additions or accessions thereto.
"Permitted Payments" means with respect to the Company or any of its
Subsidiaries (i) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Redeemable Stock) or in options, warrants
or other rights to purchase Capital Stock (other than Redeemable Stock); (ii)
any dividend or other distribution or payment in respect of redemption of
Capital Stock payable to the Company by any of its Subsidiaries or by a
Subsidiary to another Subsidiary; (iii) the repurchase or other acquisition or
retirement for value of any shares of the Company's Capital Stock, or any
option, warrant or other right to purchase shares of the Company's Capital
Stock with additional shares of, or out of the net proceeds of a substantial
contemporaneous issuance of, Capital Stock other than Redeemable Stock; (iv)
the retirement of any shares of Redeemable Capital Stock by conversion into,
or by exchange for, additional shares of Redeemable Capital Stock, or out of
the net proceeds of the substantial contemporaneous issuance (other than to a
Subsidiary of the Company) of other shares of Redeemable Capital Stock; (v)
the payment of management, advisory or consulting fees to Saratoga or its
affiliates in an amount not to exceed $600,000 per year; (vi) the redemption
of shares of the Company's Common Stock from Management Investors as part of
the Management Redemption Offer in an amount not to exceed $15,000,000; (vii)
the redemption of shares of the Company's Common Stock from APT
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Holdings Corporation in an amount not to exceed $23,000,000; (viii) any
voluntary prepayment or defeasance, redemption, repurchase or other
acquisition for value of any Debt which by its terms ranks subordinate in
right of payment to the Notes with the net proceeds from the issuance of (a)
Debt which is also subordinate (at least to the extent and in the manner as
the Debt to be prepaid or defeased, redeemed, repurchased or otherwise
acquired is subordinate to the Notes) in right of payment to the Notes;
provided that such new subordinated Debt provides for no payments of principal
by way of sinking fund, mandatory redemption or otherwise (including
defeasance) by the Company (including, without limitation, at the option of
the holder thereof other than an option given to a holder pursuant to an
"asset sale" or "change of control" covenant which is no more favorable to the
holders of such Debt than the provisions contained in corresponding Sections
of the Indenture and such Debt provides that the Company will not repurchase
such Debt pursuant to such provisions prior to the Company's repurchase of the
Notes required to be repurchased by the Company pursuant to corresponding
Sections of the Indenture) prior to the final scheduled maturity date of the
Notes and the proceeds of such new subordinated Debt are utilized for such
purpose within 45 days of issuance or (b) Capital Stock (other than Redeemable
Stock); (ix) the repurchase of Debt subordinated to the Notes pursuant to the
provisions of any "change of control" covenant set forth in the instrument
governing such subordinated Debt; provided that such repurchases will only be
permitted if all of the terms and conditions in such provisions have been
fully complied with and such repurchases are made in accordance with the terms
of the Indenture and thereof, and provided further that the Company has
repurchased all Notes required to be repurchased by the Company pursuant to
the terms and conditions of the Indenture described in "Change of Control"
prior to the repurchase of any subordinated Debt of the Company pursuant to
the provisions of any "change of control" covenant set forth in such Debt's
governing instrument; (x) the purchase of Debt of the Company which is
subordinated to the Notes in anticipation of satisfying sinking fund,
principal installments or final maturity payments, in each case within one
year of the date of such purchase; (xi) Investments not described in any other
clause of this definition made after the date of the Indenture in an aggregate
amount (net of return of investment) not to exceed $7,500,000, which amount
may be increased by an amount equal to the lesser of (A) the excess, if any,
of $15,000,000 over the aggregate amount paid on redemption of shares of
Common Stock in accordance with the Management Redemption Offer within 60 days
of the date of issuance of the Notes and (B) $5,000,000; provided that no
Investment may be made as described in this clause (xi) unless (a) such
Investment is made in a Person engaged primarily in a business that is the
same as, similar or incidental to, or complementary with, a business in which
the Company and its Subsidiaries are substantially engaged on the date of
issuance of the Notes and (b) immediately after giving effect to such
Investment, the Company would be able to incur at least $1.00 of Debt under
certain sections of the Indenture; (xii) an Investment consisting of the
contribution of the Monessen Facility to a partnership or other entity created
for the purpose of effecting the sale of the Monessen Section 29 Tax Credits;
provided that the Company shall be the general partner (or equivalent) of such
entity, an affiliate of the Company shall continue to operate the Monessen
Facility, such contribution shall be credited to the Company's capital account
(or equivalent) of such entity at the fair market value of the Monessen
Facility and the other investor's interest in such entity shall be redeemable
by the Company following expiration of the Monessen Section 29 Tax Credits;
(xiii) an Investment by a Receivables Subsidiary consisting of equity
interests in a trust or other Person established by such Receivables
Subsidiary to effect a Receivables Transaction, and (xiv) Investments made in
Cash Equivalents and Consolidated Subsidiaries.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Post-Petition Interest" means, with respect to any Debt of any Person, all
interest accrued or accruing on such Debt after the commencement of any
Insolvency or Liquidation Proceeding against such Person in accordance with
and at the contract rate (including, without limitation, any rate applicable
upon default) specified in the agreement or instrument creating, evidencing or
governing such Debt, whether or not, pursuant to applicable law or otherwise,
the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.
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"Preferred Stock" means, with respect to any Person, any and all preferred
or preference stock (however designated) of such Person whether now
outstanding or issued after the date of the Indenture.
"principal," wherever used with reference to the Notes or any Note or any
portion thereof, will be deemed to include "and premium, if any."
"Receivables Subsidiary" means a Subsidiary of the Company exclusively
engaged in Receivables Transactions and activities related thereto; provided,
however, (i) that at no time shall the Company and its Subsidiaries have more
than one Receivables Subsidiary and (ii) all Debt or other borrowings of such
Subsidiary shall be Debt (x) as to which neither the Company nor any of its
other Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Debt), (b) is
directly or indirectly liable (as a guarantor or otherwise), or (c)
constitutes the lender; (y) no default with respect to which would permit
(upon notice, lapse of time or both) any holder of any other Debt of the
Company or any of its Subsidiaries to declare a default on such other Debt or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (z) as to which the lenders (a) have acknowledged that they do
not have recourse to the holder of the Capital Stock of the debtor or (b) have
been notified in writing that they will not have any recourse to the stock or
assets of the Company or any of its other Subsidiaries.
"Receivables Transaction" means (i) the sale or other disposition to a third
party of accounts receivable or an interest therein, or (ii) the sale or other
disposition of accounts receivable or an interest therein to a Receivables
Subsidiary followed by a financing transaction in connection with such sale or
disposition of such accounts receivable (whether such financing transaction is
effected by such Receivables Subsidiary or by a third party to whom such
Receivables Subsidiary sells such accounts receivable or interests therein);
provided that in each of the foregoing, the Company or its Subsidiaries other
than the Receivables Subsidiary receive in cash at least 80% of the aggregate
principal amount of any accounts receivable financing in such transaction.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (i) required to be redeemed, in whole or in
part, prior to the stated maturity of the Notes, (ii) redeemable at the option
of the holder thereof, upon the occurrence of any event or otherwise, at any
time prior to the stated maturity of the Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) or Debt.
"Reference Period" means the four fiscal quarters for which financial
information is available (or was required to be made available) preceding the
date of a transaction giving rise to the need to make a financial calculation.
"Restricted Payment" means with respect to any Person (i) the declaration or
payment of any dividend or other distribution on account of any shares of such
Person's Capital Stock, (ii) any payment on account of the purchase,
redemption, retirement or other acquisition of (a) any shares of such Person's
Capital Stock or (b) any option, warrant or other right to acquire shares of
such Person's Capital Stock, (iii) any voluntary prepayment or defeasance,
redemption, repurchase or other acquisition or retirement for value of any
Debt ranked subordinate in right of payment to the Notes or (iv) any
Investment. Notwithstanding the foregoing, "Restricted Payment" will not
include any Permitted Payment.
"S&P" means Standard and Poor's Corporation and its successors.
"Sale and Leaseback Transaction" means with respect to any Person an
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property of such Person or any of its
Subsidiaries which has been or is being sold or transferred by such Person or
such Subsidiary to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property.
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"Senior Debt" means, at any date, (a) all Obligations of the Company under
the New Credit Facilities; (b) all Obligations of the Company under Currency
Agreements and Interest Rate Agreements (including Post-Petition Interest);
(c) all Obligations of the Company under stand-by letters of credit; and (d)
all other Debt of the Company for borrowed money, including principal,
premium, if any, and interest (including Post-Petition Interest) on such Debt,
unless the instrument under which such Debt of the Company for money borrowed
is Incurred expressly provides that such Debt for money borrowed is not senior
or superior in right of payment to the Notes, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Senior Debt shall not include (a) to the extent that it may
constitute Debt, any Obligation for Federal, state, local or other taxes; (b)
any Debt among or between the Company and any Subsidiary of the Company,
unless and for so long as such Debt has been pledged to secure Obligations
under the New Credit Facilities; (c) to the extent that it may constitute
Debt, any Obligation in respect of any trade payable Incurred for the purchase
of goods or materials, or for services obtained, in the ordinary course of
business; (d) Debt evidenced by the Notes and the Subsidiary Guarantees; (e)
Debt of the Company that is expressly subordinate or junior in right of
payment to any other Debt of the Company; (f) to the extent that it may
constitute Debt, any obligation owing under leases (other than Capitalized
Lease Obligations) or management agreements; and (g) any obligation that by
operation of law is subordinate to any general unsecured obligations of the
Company.
"Subordinated Debt" means any Debt of the Company which is expressly
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by the Company or
any Subsidiary of the Company in the ordinary course of business in connection
with the obtaining of materials or services.
"U.S. Government Obligations" means securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
are not callable or redeemable at the option of the issuer thereof.
"Wholly-Owned Subsidiary" means with respect to any Person a Subsidiary all
of the voting stock of which is owned directly or indirectly by such Person.
COVENANTS
Limitations on Debt.
Under the terms of the Indenture, the Company will not, and will not permit
its Subsidiaries to, directly or indirectly Incur any Debt (including
Acquisition Debt), except (i) Debt outstanding (or, in the case of certain
term loans under the New Credit Facilities, committed) on the date of issuance
of the Notes (after giving effect to the use of proceeds of issuance of the
Notes), including the term loans under the New Credit Facilities, but not
including Debt described in clauses (iii) and (iv) below; (ii) Debt evidenced
by the Notes and the Subsidiary Guarantees; (iii) Debt of Koppers Australia,
in an aggregate principal amount not to exceed the Australian dollar
equivalent of $40,000,000 at the time such Debt is issued, in the form of term
loans under the New Credit Facilities; (iv) Debt of the Company or Koppers
Australia Incurred under the revolving credit facilities provided for in the
New Credit Facilities, including (without duplication) any such Debt in
respect of letters of credit (not including the letters of credit described in
clause (v) below), in an aggregate principal amount not to exceed the sum of
80% of accounts receivable (reduced as necessary to reflect the disposition of
any such accounts
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receivable in a Receivables Transaction) and 50% of inventory as shown on the
Company's consolidated balance sheet for the immediately preceding fiscal
quarter for which financial statements are available; (v) Debt in respect of
letters of credit with an aggregate face amount not to exceed the Australian
dollar equivalent of $60,000,000 at the time such letters of credit are issued
at any one time outstanding issued to provide support for loans to Koppers
Australia; (vi) Debt in respect of letters of credit issued in the ordinary
course of business not to exceed $15,000,000 in aggregate amount at any one
time outstanding; (vii) Debt of any Subsidiary to the Company or any Wholly-
Owned Subsidiary; (viii) Debt secured by Liens described in (x) and (xv) of
the definition of Permitted Liens in an aggregate amount not to exceed
$5,000,000 at any one time outstanding and refinancings thereof provided that
the amount of such Debt is not increased; (ix) Debt issued in exchange for, or
the proceeds of which are used to refinance, outstanding or committed Debt of
the Company or any of the Notes in an amount (or, if such new Debt, is issued
at a price less than the principal amount thereof, with an original issue
price) not to exceed the amount so exchanged or refinanced (plus accrued
interest, fees, expenses and other obligations related thereto), provided that
if the Debt to be exchanged or refinanced by its terms ranks subordinate in
right of payment to the Notes, (1) the Debt exchanged for, or the proceeds of
which are used to refinance, such Debt is also subordinate to the Notes (at
least to the extent and in the manner that the Debt to be exchanged or
refinanced is subordinate to the Notes) in right of payment to the Notes and
(2) no payments of principal of such Debt by way of sinking fund, mandatory
redemption, mandatory repurchase or otherwise (including defeasance) may be
made by the Company (including, without limitation, at the option of the
holder thereof, other than an option given to a holder pursuant to an "asset
sale" or "change of control" covenant which is no more favorable to the
holders of such Debt than the corresponding provisions contained in the
Indenture, and such Debt provides that the Company will not repurchase such
Debt pursuant to such provisions prior to the Company's repurchase of the
Notes required to be repurchased by the Company pursuant to the corresponding
provisions contained in the Indenture) at any time prior to the final
scheduled maturity date of the Notes; provided further, that (A) if any
scheduled mandatory principal payment of the Debt being exchanged for or
refinanced has a due date after December 1, 2007, the corresponding scheduled
mandatory payment of the Debt issued in exchange for, or to refinance such
Debt, will not have a due date on or prior to December 1, 2007, and (B) in no
event may Debt of the Company or a Subsidiary of the Company be refinanced by
means of Debt of any other Subsidiary of the Company pursuant to the covenant
described in this clause; (x) Debt under Currency Agreements and Interest Rate
Agreements; (xi) Debt of Hickson outstanding from time to time in an aggregate
principal amount not to exceed the Australian dollar-equivalent of $10,000,000
at the time such Debt is issued, to the extent such Debt could be incurred
pursuant to the following paragraph; (xii) Asset Dispositions in the form of
Receivables Transactions; (xiii) Guarantees of Debt under the New Credit
Facilities otherwise permitted under the Indenture; and (xiv) to the extent
not otherwise provided for in clauses (i) through (xiii) above, Debt of the
Company in an aggregate outstanding principal amount not to exceed $5,000,000
at any one time outstanding.
Notwithstanding the provisions set forth in the preceding paragraph, the
Company and the Subsidiary Guarantors may Incur Debt, including Acquisition
Debt, if on the Determination Date and after giving effect to the Incurrence
of such Debt and the application of the proceeds therefrom, the Consolidated
Fixed Charge Ratio for the Reference Period immediately preceding the
Determination Date is greater than 2.0 to 1.
Limitation on Guarantees of Debt by Subsidiaries.
The Indenture provides that in the event that any Subsidiary, directly or
indirectly, Guarantees any Debt of the Company under the New Credit Facilities
(the "Other Debt"), the Company will cause such Subsidiary to concurrently
Guarantee the Company's Obligations under the Indenture and the Notes to the
same extent that such Subsidiary Guaranteed the Company's Obligations under
the Other Debt (including waiver of subrogation, if any); provided, however,
that if such Other Debt is (i) Senior Debt, such Subsidiary Guarantee will be
subordinated in right of payment to all Guarantor Senior Debt (which will
include such Guarantee of such Other Debt) pursuant to the subordination
provisions of the Indenture (which subordination will be substantially
identical to the subordination provisions of the Indenture applicable to the
Notes), (ii) Debt which is not Senior Debt or Subordinated Debt, such
Subsidiary Guarantee will be pari passu in right of payment with the Guarantee
of the Other Debt, or (iii) Subordinated Debt, such Subsidiary Guarantee will
be senior in right of payment to
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the Guarantee of the Other Debt (which Guarantee of such Subordinated Debt
will provide that such Guarantee is subordinated to the Subsidiary Guarantee
to the same extent and in the same manner as the Notes are subordinated to
Senior Debt); provided, further, however, that each Subsidiary issuing a
Subsidiary Guarantee will be automatically and unconditionally released and
discharged from its obligations under such Subsidiary Guarantee upon the
release or discharge of the Guarantee of the Other Debt that resulted in the
Company's obligations under the Notes and the Indenture being so Guaranteed.
The Company will cause each Subsidiary required to issue a Subsidiary
Guarantee after the date of issuance of the Notes to make certain deliveries,
and such deliveries will have the effects, described above under "Guarantees
of the Notes."
Limitation on Layering.
The Company shall not, directly or indirectly, Incur any Debt that by its
terms would expressly rank senior in right of payment to the Notes and
expressly rank subordinate in right of payment to any other Debt of the
Company.
The Company shall not permit any Subsidiary Guarantor to, and no Subsidiary
Guarantor shall, directly or indirectly, Incur any Debt that by its terms
would expressly rank senior in right of payment to the Subsidiary Guarantee of
such Subsidiary Guarantor and expressly rank subordinate in right of payment
to any Guarantor Senior Debt of such Subsidiary Guarantor.
Limitations on Restricted Payments.
Under the terms of the Indenture, the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment unless (a) at the time of such Restricted Payment or after giving
effect thereto, no Event of Default, and no event that through the passage of
time or the giving of notice, or both, would become an Event of Default, will
have occurred and be continuing, (b) after giving effect thereto, the Company
could Incur at least $1.00 of Debt pursuant to the provisions described in the
second paragraph under "Limitations on Debt" and (c) after giving effect
thereto, the aggregate amount of all Restricted Payments
made by the Company and its Subsidiaries after the date of issuance of the
Notes will not exceed the sum (without duplication) of: (i) 50% of
Consolidated Net Income of the Company accrued for the period (taken as one
accounting period) commencing with January 1, 1998, and ending with the first
full fiscal quarter ended immediately prior to the date of such calculation;
provided that if Consolidated Net Income for such period is less than zero,
then minus 100% of the amount of such loss; plus (ii) 50% of that portion of
the net after tax cash proceeds from the sale, transfer, carryover, lease or
other disposition of the Monessen Facility that is directly attributable to
the Monessen Section 29 Tax Credits; plus (iii) the aggregate net cash
proceeds received by the Company from the issuance or sale (other than to a
Subsidiary) of its Capital Stock (other than Redeemable Stock) after the date
of issuance of the Notes (including Capital Stock (other than Redeemable
Stock) issued upon conversion of, or in exchange for, securities other than
its Capital Stock), and warrants and other rights to purchase (not including
any such warrants or rights to purchase which are redeemable at the option of
the holder thereof) its Capital Stock (other than Redeemable Stock); plus (iv)
$5,000,000. Notwithstanding the foregoing, the Company may make payment of a
dividend or other distribution on account of its shares of Capital Stock
within 90 days of the declaration thereof if such declaration was permitted
under the provisions described in this paragraph.
Limitations on Asset Disposition.
Under the terms of the Indenture, except for any Asset Disposition permitted
to be made as described in "Consolidation, Merger and Sale of Assets," if the
aggregate fair market value of all Asset Dispositions (as determined in good
faith by the Board of Directors as of the time of each Asset Disposition)
during any consecutive twelve-month period will exceed $5,000,000 the Company
will not make, and will not permit any of its Subsidiaries to make, any Asset
Disposition unless (i) the Company (or the Subsidiary, as the case may be)
receives consideration at the time of each such Asset Disposition at least
equal to the fair market value of the
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shares or assets sold or otherwise disposed of (as determined in good faith by
the Board of Directors if the Asset Disposition involves shares or assets
having a fair market value of more than $10,000,000); (ii) not less than 80%
of the consideration received by the Company (or such Subsidiary, as the case
may be) is in the form of cash (other than in the case of a full or partial
disposition of the Monessen Facility for the purpose of effecting the sale of
all or a portion of the Monessen Section 29 Tax Credits), provided that any
note or other obligation received by the Company (or such Subsidiary, as the
case may be) that is immediately converted into cash will be deemed to be cash
for purposes of clause (ii); and (iii) the Net Cash Proceeds from such Asset
Dispositions are applied, (A) within twelve months of the date of the receipt
of the Net Cash Proceeds, (1) to the reinvestment in the business or
businesses of the Company or any of its Subsidiaries; provided, that this
clause (1) shall not be applicable in the case of Net Cash Proceeds from any
Asset Disposition in the form of a Receivables Transaction or (2) to the
extent such Net Cash Proceeds are not actually applied, or cannot be applied,
in accordance with clause (1), or, if after being so applied there remain Net
Cash Proceeds, to repay Senior Debt or Guarantor Senior Debt (other than the
Notes and Debt owed by the Company to a Subsidiary of the Company or by a
Subsidiary of the Company to the Company or another Subsidiary) (including
interest thereon and fees, expenses and other obligations related thereto) and
in connection with any such payment, any related loan commitment, standby
facility or the like will be reduced in an amount equal to the principal
amount so repaid, and (B) to the extent that such Net Cash Proceeds are not
actually applied in accordance with clause (A), or, if after being so applied
there remain Net Cash Proceeds, to make an Offer to purchase the Notes as
described in the following paragraph. Notwithstanding the foregoing, to the
extent that any or all of the Net Cash Proceeds of any Asset Disposition are
prohibited or delayed by applicable non-United States law from being
repatriated to the United States, the portion of such Net Cash Proceeds so
affected will not be required to be applied as described in this clause (other
than to repay Debt of the Subsidiary making such Asset Disposition as
contemplated by clause (A)) at the time provided above but may be retained by
the applicable Subsidiary for so long, but only so long as the applicable
local law will not permit repatriation to the United States and once such
repatriation of any of such affected Net Cash Proceeds is permitted under the
applicable local law, such repatriation will be immediately effected and such
repatriated Net Cash Proceeds will be applied in the manner described in this
section; provided that to the extent that the Company has determined in good
faith that repatriation of any or all of the Net Cash Proceeds of any such
Asset Disposition would have a material adverse tax cost consequence, the Net
Cash Proceeds so affected may be retained by the applicable Subsidiary for so
long as such material adverse tax cost event would continue.
In the event Net Cash Proceeds are required to be applied to the purchase of
Notes as described in clause (iii) of the preceding paragraph, the Company
will be required to purchase Notes tendered pursuant to a tender offer by the
Company for the Notes (the "Offer") at a purchase price of 100% of the
principal amount of the Notes plus accrued interest to the purchase date in
accordance with the procedures (including prorating in the event of
oversubscription) described in the Indenture. If the aggregate purchase price
of Notes tendered pursuant to the Offer is less than the Net Cash Proceeds
allotted to the purchase of the Notes, the Company may utilize such Net Cash
Proceeds for any purpose otherwise permitted under the Indenture. The Company
will not be required to make an Offer for Notes as described in this section
if the Net Cash Proceeds available therefor are less than $5,000,000 (which
lesser amounts not applied to an offer will be carried forward and cumulated
for each 36 consecutive month period for purposes of determining whether an
Offer is required with respect to the Net Cash Proceeds from any subsequent
Asset Disposition).
Within 30 days after the date on which Net Cash Proceeds that are required
to be applied to an Offer exceed $5,000,000, the Company will be obligated to
deliver to the Trustee and the Trustee will send by first-class mail to each
Holder a written notice stating that: (1) such Holder may elect to have his
Notes purchased by the Company either in whole or in part (subject to
prorating as hereinafter described in the event the Offer is oversubscribed)
in multiples of $1,000 principal amount, at the applicable purchase price; (2)
any Note not tendered or accepted for payment will continue to accrue
interest; (3) any Note accepted for payment pursuant to the Offer will cease
to accrue interest after the purchase date; and (4) Holders will be entitled
to withdraw their election in the manner described in the following paragraph.
The notice will also specify a purchase date not less than 30 days nor more
than 60 days after the date of such notice and will contain information
concerning the
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business of the Company which the Company in good faith believes will enable
such Holders to make an informed decision.
Holders electing to have a Note purchased will be required to surrender the
Note, with an appropriate form duly completed, to the Trustee at the address
specified in the notice at least one Business Day prior to the Purchase Date.
Holders will be entitled to withdraw this election if the Trustee or paying
agent (if any) receives not later than the close of business on the Business
Day prior to the Purchase Date a telegram, telex, facsimile transmission, or
letter setting forth the name of the Holder and a statement that such Holder
is withdrawing his election to have all or a portion of his Notes purchased.
If at the expiration of the Offer Period the aggregate principal amount of
Notes surrendered by Holders exceeds the Offer Amount, the Company will select
the Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of
$1,000 or integral multiples thereof, will be purchased). Holders whose Notes
are purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered.
In the event the Company is unable to purchase Notes from Holders in an
Offer because such purchase is prohibited by any provision of applicable law,
the Company need not make an Offer. The Company will then be obligated to use
such Net Cash Proceeds as described in clause (iii) of the first paragraph of
this section.
Whenever Net Cash Proceeds are received by the Company, and prior to the
allocation of such Net Cash Proceeds as described in this section, such Net
Cash Proceeds will be set aside by the Company in a separate account pending
allocation.
Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries.
Under the terms of the Indenture, the Company will not, and will not permit
any Subsidiary to, create, assume or otherwise cause or suffer to exist or to
become effective any consensual encumbrance or restriction on the ability of
any Subsidiary to (a) pay dividends or make any other distributions on its
Capital Stock; (b) make payments in respect of any Debt owed to the Company or
any of the Company's Subsidiaries; (c) make loans or advances to the Company
or any of the Company's Subsidiaries; or (d) transfer any of its property to
the Company or any of the Company's Subsidiaries other than (i) encumbrances
and restrictions included (1) in the Indenture or (2) in any agreement in
effect on the date of the Indenture (including, without limitation, the New
Credit Facility) or (3) in any partial or total initial or successive
refinancing, refunding or replacement of any agreement referred to in clause
(2), provided that any encumbrances or restrictions in any such refinancing,
refunding, replacement, amendment, modification or supplement are not
materially less favorable to the Company than those in such agreement in
effect on the date of the Indenture; (ii) customary provisions contained in
agreements with respect to Liens applicable to the assets subject to such
Liens; (iii) encumbrances or restrictions binding upon any Person at the time
such Person becomes a Subsidiary of the Company, provided that such
encumbrances or restrictions were not incurred in anticipation of such Person
becoming a Subsidiary of the Company or (iv) restrictions applicable to a
Receivables Subsidiary arising from a Receivables Transaction. Nothing
described in this section will prevent the Company from Incurring or suffering
to exist any Lien which is permitted as described in "Limitations on Liens."
Limitations on Issuance of Subsidiary Preferred Stock.
Under the terms of the Indenture, the Company will not permit any of its
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Subsidiary) or permit any Person (other than the Company or a
Wholly-Owned Subsidiary) to own or hold any interest in any Preferred Stock of
any such Subsidiary unless the Subsidiary would be permitted to Incur Debt as
described in "Limitations on Debt" in an aggregate principal amount equal to
the aggregate liquidation value of such Preferred Stock.
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Limitations on Liens.
The Company will not, and will not cause or permit any Subsidiary to,
directly or indirectly, Incur or suffer to exist any Liens of any kind against
or upon any of their respective properties or assets now owned or hereafter
acquired, or any proceeds therefrom or any income or profits therefrom, to
secure any Debt unless contemporaneously therewith effective provision is
made, in the case of the Company, to secure the Notes and all other amounts
due under the Indenture, and in the case of a Subsidiary which is a Subsidiary
Guarantor, to secure such Subsidiary Guarantor's Subsidiary Guarantee and all
other amounts due under the Indenture, equally and ratably with such Debt (or,
in the event that such Debt is subordinated in right of payment to the Notes
or such Subsidiary Guarantee, prior to such Debt) with a Lien on the same
properties and assets securing such Debt for so long as such Debt is secured
by such Lien, except for (i) Liens securing any Senior Debt or any Guarantor
Senior Debt, (ii) Liens securing Debt of a Subsidiary which is not required to
be a Subsidiary Guarantor and (iii) Permitted Liens.
Limitations on Sale and Leaseback Transactions.
The Company will not and will not permit any Subsidiary to enter into any
Sale and Leaseback Transaction with respect to any assets (whether now owned
or hereafter acquired) unless (i) the net proceeds of the sale or transfer of
the property to be leased are at least equal to the fair market value (as
determined by the Board of Directors of the Company) of such assets (other
than in the case of a Sale and Leaseback Transaction entered into in
connection with an Approved Government Financing) and (ii) the Company could
incur the Attributable Debt in respect of such Sale and Leaseback Transaction
in compliance with the covenant described under "Limitation on Debt."
Transactions with Affiliates.
Neither the Company nor any of its Subsidiaries will directly or indirectly
enter into any transaction (including, without limitation, the sale, purchase
or lease of any assets or properties or the rendering of any services) with
any Affiliate of the Company or direct or indirect holder of 5% or more of any
class of Capital Stock of the Company or any such Affiliate (other than a
Wholly-Owned Subsidiary of the Company) except for transactions made in good
faith the terms of which are fair and reasonable to the Company or such
Subsidiary, as the case may be, and are at least as favorable as the terms
which could be obtained by the Company or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's length basis with Persons who are
not such a holder or Affiliate; provided that any such transaction will be
conclusively deemed to be on terms which are fair and reasonable to the
Company or any of its Subsidiaries and on terms which are at least as
favorable as the terms which could be obtained on an arm's length basis with
Persons who are not such a holder or Affiliate if such transaction is approved
by a majority of the Company's disinterested directors and; provided further
that with respect to any transaction or series of related transactions the
aggregate amount of which is in excess of $10,000,000, in addition to approval
of its board of directors, the Company will obtain a written opinion of an
Independent Financial Advisor stating that the terms of such transaction are
fair to the Company or its Subsidiary, as the case may be, from a financial
point of view. The covenant described in this paragraph will not apply to (a)
the payment of reasonable and customary regular fees to directors of the
Company, (b) any Permitted Payment and any Restricted Payment not otherwise
prohibited by the Indenture or (c) transactions between a Receivables
Subsidiary and any Person as part of a Receivables Transaction, but only to
the extent such transactions are solely in connection with the Receivables
Transaction.
Change of Control.
Upon a Change of Control, each Holder of the Notes will have the right to
require that the Company repurchase such Holder's Notes at a repurchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase, in accordance with the terms
contemplated in the following paragraph (the "Change of Control Offer").
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Within 30 days following any Change of Control, the Company will mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to repurchase such Holder's Notes at a repurchase price in cash equal to 101%
of the principal amount the plus accrued and unpaid interest, if any, to the
date of repurchase (the "Change of Control Purchase Price"); (2) the
circumstances and relevant facts regarding such Change of Control (including
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (3) the
repurchase date (which will be not earlier than 30 days or later than 60 days
from the date such notice is mailed) (the "Repurchase Date"); (4) that any
Note not tendered will continue to accrue interest; (5) that any Note accepted
for payment pursuant to the Change of Control Offer will cease to accrue
interest after the Repurchase Date, (6) that holders electing to have a Note
purchased pursuant to a Change of Control Offer will be required to surrender
the Note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the paying agent at the address specified in
the notice prior to the close of business on the Repurchase Date; (7) that
holders will be entitled to withdraw their election if the paying agent
receives, not later than the close of business on the third Business Day (or
such shorter periods as may be required by applicable law) preceding the
Repurchase Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the holder, the principal amount of Notes the holder
delivered for purchase, and a statement that such holder is withdrawing his
election to have such Notes purchased; and (8) that holders which elect to
have their Notes purchased only in part will be issued new Notes in a
principal amount equal to the unpurchased portion of the Notes surrendered.
On the Repurchase Date, the Company will (i) accept for payment Notes or
portions thereof tendered pursuant to the Change of Control Offer, (ii)
deposit with the Trustee money sufficient to pay the purchase price of all
Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee Notes so accepted together with an officers'
certificate stating the Notes or portions thereof tendered to the Company. The
Trustee will promptly mail to the holders of Note so accepted payment in an
amount equal to the purchase price, and prompt authenticate and mail to such
holders a new Note in a principal amount equal to any unpurchased portion of
the Note surrendered. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Repurchase
Date.
The Indenture will require that if the New Credit Facilities are in effect,
or any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to
holders described in the preceding paragraph, but in any event within 20 days
following any Change of Control, the Company covenants to (i) repay in full
all obligations under or in respect of the New Credit Facilities or offer to
repay in full all obligations under or in respect of the New Credit Facilities
and repay the obligations under or in respect of the New Credit Facilities of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the New Credit Facilities to permit the repurchase of the Notes as
described above. The
Company must first comply with the covenant described in the preceding
sentence before it shall be required to purchase Notes in the event of a
Change of Control; provided that the Company's failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (c) under "Events of Default" below if not cured within 30
days after the notice required by such clause. As a result of the foregoing, a
holder of the Notes may not be able to compel the Company to purchase the
Notes unless the Company is able at the time to refinance all of the
obligations under or in respect of the New Credit Facilities or obtain
requisite consents under the New Credit Facilities. Failure by the Company to
make a Change of Control Offer when required by the Indenture constitutes a
default under the Indenture and, if not cured within 30 days after notice,
constitutes an Event of Default.
The Indenture will require that (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Debt that is subordinated in right of payment
to the Notes or (ii) Preferred Stock, and the Company or such Subsidiary is
required to make a change of control offer or to make a distribution with
respect to such subordinated Debt or Preferred Stock in the event of a change
of control, the Company will not consummate any such offer or distribution
with respect to such subordinated Debt or Preferred Stock until such time as
the Company will have paid the Change of Control Purchase Price in full to the
holders of Notes that have accepted
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the Change of Control Offer and shall otherwise have consummated the Change of
Control Offer made to holders of the Notes and (B) the Company will not issue
Debt that is subordinated in right of payment to the Notes or Preferred Stock
with change of control provisions requiring the payment of such Debt or
Preferred Stock prior to the payment of the Notes in the event of a Change in
Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to repurchase Notes, if such
repurchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of
Rule 14e-1 as then in effect with respect to such repurchase.
Reports.
Whether or not required by the rules and regulations of the Securities and
Exchange Commission (the "Commission"), so long as any Notes are outstanding,
the Company will file with the Commission, to the extent such filings are
accepted by the Commission, and will furnish to the holders of Notes all
quarterly and annual reports and other information, documents and reports that
would be required to be filed with the Commission pursuant to Section 13 of
the Exchange Act if the Company were required to file under such section. In
addition, the Company will make such information available to prospective
purchasers of the Notes who request it in writing.
EVENTS OF DEFAULT
In case one or more of the following Events of Default (whatever the reason
for such Event of Default and whether it will be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body) will have occurred and be continuing: (a) default in the
payment of any installment of interest upon any of the Notes as and when the
same will become due and payable, and continuance of such default for a period
of 30 days; (b) default in the payment of all or any part of the principal on
any of the Notes as and when the same will become due and payable either at
maturity, upon any redemption, upon mandatory repurchase, by declaration or
otherwise; or (c) failure on the part of the Company duly to observe or
perform any other of the covenants or agreements on the part of the Company in
the Notes or in the Indenture contained for a period of 60 days after the date
on which written notice specifying such failure, stating that such notice is a
"Notice of Default" under the Indenture and demanding that the Company remedy
the same, will have been given by registered or certified mail, return receipt
requested, to the Company by the Trustee, or to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the Notes at the
time outstanding; (d) an involuntary case or other proceeding shall be
commenced against the Company or any of its Subsidiaries seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for
a period of 60 days; or an order for relief shall be entered against the
Company or any of its Subsidiaries under the federal bankruptcy laws as now or
hereafter in effect; (e) the Company or any of its Subsidiaries will commence
a voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consent to the entry of an order for relief
in an involuntary case under any such law, or consent to the appointment or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or any of its Subsidiaries
or for any substantial part of its property, or make any general assignment
for the benefit of creditors; (f) an event of default, as defined in any
indenture or instrument evidencing or under which the Company or any
Subsidiary has at the date of the Indenture or will hereafter have outstanding
at least $10,000,000 aggregate principal amount of Debt, will have occurred
and be continuing and such Debt will have been accelerated so that the same
will be or become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration will not be
rescinded or annulled within 30 days after such acceleration, provided that if
such event of default under such indenture or instrument will be remedied or
cured by the Company or waived by the
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holders of such indebtedness, then the Event of Default under the Indenture by
reason thereof will be deemed likewise to have been thereupon remedied, cured
or waived without further action upon the part of either the Trustee or any of
the Noteholders; (g) any final judgment or order (not covered by insurance)
for the payment of money in excess of $10,000,000 in the aggregate for all
such final judgments or orders (treating any deductibles, self-insurance or
retention as not so covered) will be rendered against the Company or any
Subsidiary and will not be discharged, and there will be any period of 30
consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding
against all such Persons to exceed $10,000,000 during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal or
otherwise, will not be in effect; (h) the Company and/or one or more of its
Subsidiaries fails to make (A) at the final (but not any interim) fixed
maturity of any issue of Debt a principal payment of $10,000,000 or more or
(B) at the final (but not any interim) fixed maturity of more than one issue
of such Debt principal payments aggregating $10,000,000 or more and, in the
case of clause (A), such defaulted payment will not have been made, waived or
extended within 30 days of the payment default and, in the case of clause (B),
all such defaulted payments will not have been made, waived or extended within
30 days of the payment default that causes the amount described in clause (B)
to exceed $10,000,000; (i) the nonpayment of any two or more items of Debt
that would constitute at the time of such nonpayments, but for the individual
amounts of such Debt, an Event of Default under clause (f) or clause (h)
above, or both, and which items of Debt aggregate $10,000,000 or more; (j) any
Subsidiary Guarantee shall for any reason cease to be in full force and
effect; then, and in each and every such case, unless the principal of all of
the Notes will have already become due and payable, either the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding under the Indenture, by notice in writing to the Company (and to
the Trustee if given by Noteholders), may declare the entire principal of all
the Notes and the interest accrued thereon, to be due and payable immediately,
and upon any such declaration the same will become immediately due and
payable; provided that, if an Event of Default specified in clause (d) or (e)
above occurs with respect to the Company, all unpaid principal of and accrued
interest on the Notes then outstanding will become and be immediately due and
payable, without any declaration, presentment, demand, protest, notice or
other act on the part of the Trustee or any Holder. Such acceleration may be
annulled and past defaults (other than the non-payment of the principal of the
Notes which will have become due otherwise than by acceleration) may be waived
by the holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, upon the
conditions provided in the Indenture. For information as to the waiver of
defaults, see "Modification and Waiver."
The Indenture will require that the Company furnish to the Trustee on or
before 90 days after the end of the Company's fiscal year and on or before 45
days after the end of each of the first, second and third fiscal quarters in
each year a brief certificate from the principal executive, financial or
accounting officer of the Company as to his or her knowledge of the Company's
compliance with all conditions and covenants under the Indenture (such
compliance to be determined without regard to any period of grace or
requirement of notice provided under the Indenture).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The terms of Indenture and the Notes will not prevent any consolidation of
the Company with, or merger of the Company into, any other corporation or
corporations (whether or not affiliated with the Company), or successive
consolidations or mergers to which the Company or its successor or successors
will be a party or parties, nor will it prevent any sale, lease or conveyance
of all or substantially all of the property of the Company as an entirety or
substantially as an entirety to any Person; provided that: (a) the Company
will be the continuing Person, or the Person (if other than the Company)
formed by such consolidation or into which the Company is merged or to which
properties and assets of the Company are transferred will be a solvent
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and will expressly assume in writing
all the obligations of the Company under the Notes, (b) immediately before and
immediately after giving effect to such transaction no Event of Default or
event or condition which through the giving of notice or lapse of time or both
would become an Event of Default will have occurred and be continuing,
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(c) the Net Worth of the Company or the surviving entity, as the case may be,
on a pro forma basis after giving effect to such transaction is not less than
the Net Worth of the Company immediately prior to such transaction, and (d)
immediately after giving effect to such transaction on a pro forma basis, the
Company or the surviving entity would be able to incur at least $1.00 of Debt
pursuant to the provisions described in the second paragraph under
"Limitations on Debt." However, the foregoing will not prohibit a transaction,
the principal purpose of which is (as determined in good faith by the Board of
Directors of the Company and evidenced by the resolution thereof) to change
the state of incorporation of the Company, and such transaction does not have
as one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge of Indenture.
Under the terms of the Indenture, the Company will be deemed to have paid
and discharged the entire indebtedness on all the outstanding Notes on the
123rd day after the irrevocable deposit referred to in subparagraph (A) below,
and the provisions of the Indenture, as it relates to such outstanding Notes,
will no longer be in effect (except as to: (a) rights of registration of
transfer and exchange, and the Company's right of optional redemption, (b)
substitution of apparently mutilated, defaced, destroyed, lost or stolen
Notes, (c) the rights of Holders to receive payments of principal thereof and
interest thereon, (d) the rights, obligations and immunities of the Trustee
under the Indenture and (e) the rights of the Noteholders as beneficiaries
with respect to the property so deposited with the Trustee payable to all or
any of them) if (A) with reference to this provision the Company has deposited
or caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of the Indenture) and conveyed all right, title
and interest for the benefit of the Holders, under the terms of an irrevocable
trust agreement in form and substance satisfactory to the Trustee, as trust
funds in trust solely for the benefit of the Noteholders, (i) cash in an
amount, or (ii) U.S. Government Obligations maturing as to principal and
interest at such times and in such amounts as will insure the availability of
cash in an amount, or (iii) a combination thereof, sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of reinvestment of such interest and after
payment of all federal, state and local taxes or other charges payable by the
Trustee with respect to such trust fund, the principal of and each installment
of interest on the outstanding Notes at the maturity date or the redemption
date (provided, that in the case of redemption, if such Notes are to be
redeemed prior to the maturity thereof, notice of such redemption shall have
been given as provided in the Indenture or provision satisfactory to the
Trustee shall have been made for giving such Notice) of such principal or
installment of interest, on the day on which such payments are due and payable
in accordance with the terms of the Indenture and the Notes; provided, that
the Trustee or paying agent will have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to the
payment of said principal and interest with respect to the Notes; (B) such
deposit will not cause the Trustee to have a conflicting interest for purposes
of the Trust Indenture Act, as amended; (C) such deposit will not result in a
breach or violation of, or constitute a default under, the Indenture or any
other agreement or instrument to which the Company is a party or by which it
is bound; (D) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or lapse
of time or both would become an Event of Default, will have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day after such date; (E) the Company has delivered to the Trustee (i)
either (x) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of the Company's
exercise of its option described in this paragraph and will be subject to
Federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such option had not been exercised, or
(y) an Opinion of Counsel to the same effect as the ruling described in clause
(x), and (ii) an Opinion of Counsel to the effect that (x) the trust funds
will not be subject to any rights of holders of Senior Debt, including,
without limitation, those arising under the Indenture and (y) the creation of
the defeasance trust will not violate the Investment Company Act of 1940; (F)
the Company has paid or caused to be paid all sums then payable by the Company
under the Indenture and under the Notes; and (G) the Company has delivered to
the Trustee an
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Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to the defeasance contemplated by
this provision have been complied with.
Defeasance of Certain Obligations.
The Company may omit to comply with the terms, provisions or conditions
described in "Covenants" and clauses (c) and (d) in "Consolidation, Merger and
Sale of Assets" if (a) with reference to the provision described herein, the
Company has deposited or caused to be irrevocably deposited with the Trustee
(or another trustee satisfying the requirements of the Indenture) and conveyed
all right, title and interest for the benefit of the Noteholders, under the
terms of an irrevocable trust agreement in form and substance satisfactory to
the Trustee, as trust funds in trust solely for the benefit of the
Noteholders, (i) cash in an amount, or (ii) U.S. Government Obligations
maturing as to principal and interest at such times and in such amounts as
will insure the availability of cash in an amount, or (iii) a combination
thereof, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, to pay and discharge, without consideration of
reinvestment of such interest and after payment of all federal, state and
local taxes or other charges payable by the Trustee with respect to such trust
fund, the principal of and each installment of interest on the outstanding
Notes on the maturity date or the redemption date (provided, that in the case
of redemption, if such Notes are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as provided in the Indenture
or provision satisfactory to the Trustee shall have been made for giving such
Notice) of such principal or installment of interest on the day on which such
payments are due and payable in accordance with the terms of the Indenture and
of such Notes; provided, that the Trustee or paying agent will have been
irrevocably instructed to apply such money or the proceeds of such U.S.
Government Obligations to the payment of said principal and interest with
respect to the Notes; (b) such deposit will not cause the Trustee to have a
conflicting interest for purposes of the Trust Indenture Act, as amended; (c)
such deposit will not result in a breach or violation of, or constitute a
default under, the Indenture or any other agreement or instrument to which the
Company is a party or by which it is bound; (d) immediately after giving
effect to such deposit on a pro forma basis, no Event of Default or event
which with notice or lapse of time or both would become an Event of Default
will have occurred and be continuing on the date of such deposit; (e) the
Company has delivered to the Trustee an Opinion of Counsel to the effect that
(i) the Holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of the Company's exercise of its
option described herein and will be subject to Federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such option had not been exercised, (ii) Holders of the Notes will
have a valid and perfected first priority security interest in the trust funds
and (iii) the creation of the defeasance trust will not violate the Investment
Company Act of 1940; (f) the Company has paid or caused to be paid all sums
then payable by the Company under the Indenture and under the Notes; and (g)
the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent herein described have been complied with.
MODIFICATION AND WAIVER
Modifications, waivers and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Notes; provided that
no such modification, waiver or amendment will (a) extend the final maturity
of any Note, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, or alter the provisions with
respect to redemption or mandatory repurchase thereof (other than those
relating to a Change of Control), or impair or affect the right of any
Noteholder to institute suit for the payment thereof without the consent of
the holder of each Note so affected, or (b) reduce the aforesaid percentage of
Notes, the consent of the holders of which is required for any such
supplemental indenture or (c) modify the subordination provisions of the
Indenture in a manner adverse to the Noteholders, without the consent of the
holders of all Notes then outstanding; and provided, further, that no such
modification, waiver or amendment will make any change in the provisions
described above under the caption "Change of Control" or in the obligations of
the Company to make a Change of Control Offer or the definitions related
thereto that could adversely affect the
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rights of any holder of the Notes without the consent of the holders of not
less than 75% in aggregate principal amount of the outstanding Notes.
CONCERNING THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. If an Event of Default has occurred and is continuing,
the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a
prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939 contain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases or to realize on certain
property received by it in respect of any such claims as security or
otherwise. The Trustee is permitted to engage in other transactions; provided,
however, that if it acquires any conflicting interest (as defined in Section
310(b) of the Trust Indenture Act of 1939), it must eliminate such conflict or
resign.
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders not joining in the giving
of such direction. A Holder may not pursue any remedy with respect to the
Indenture unless such holder previously will have given to the Trustee written
notice of default and of the continuance thereof, and unless also the holders
of not less than 25% in aggregate principal amount of the Notes then
outstanding will have made written request upon the Trustee to institute such
action or proceedings in its own name as trustee under the Indenture and will
have offered to the Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby
and the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity will have failed to institute any such action or
proceedings and no direction inconsistent with such written request will have
been given to the Trustee.
DELIVERY AND FORM OF SECURITIES
Book-Entry, Delivery and Form
Except as set forth herein, the New Notes will initially be issued in the
form of one or more registered notes in global form (the "New Global Note" and
together with the global notes representing the Old Notes, the "Global Note").
The New Global Note will be deposited on the Exchange Date with, or on behalf
of, the Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note
Holder"). The Depositary will maintain the Notes in denominations of $1,000
and integral multiples thereof through its book-entry facilities.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers (including the Initial Purchaser), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's
system is also available to other entities such as banks, brokers, dealers and
trust companies (collectively, the "Indirect Participants" or the
"Depositary's Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of the Depositary only through the Depositary's Participants or the
Depositary's Indirect Participants.
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The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Note and (ii) ownership of the Notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests
of the Depositary's Participants), the Depositary's Participants and the
Depositary's Indirect Participants.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer the Notes will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Transfer Restrictions."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder of outstanding Notes
under the Indenture. Except as provided below, owners of Notes will not be
entitled to have Notes registered in their names and will not be considered
the owners or Holders thereof under the Indenture for any purpose, including
with respect to the giving of any directions, instructions or approvals to the
Trustee thereunder. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Notes by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such Notes.
Payments in respect of the principal of and interest and liquidated damages
on any Notes registered in the name of a Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of such
Global Note Holder in its capacity as the registered Holder under the
Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names any Notes, including the Global Notes, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither of the
Company or the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Notes (including
principal, interest and liquidated damages). The Company believes, however,
that it is currently the policy of the Depositary to immediately credit the
accounts of the relevant Participants with such payments, in amounts
proportionate to their respective beneficial interests in the relevant
security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in definitive form. Upon any such issuance, the Trustee is
required to register such Notes in the name of, and cause the same to be
delivered to, such person or persons (or the nominee of any thereof). Such
Notes would be issued in fully registered form and would be subject to the
legal requirements described herein under the caption "Transfer Restrictions."
In addition, if (i) the Company
notifies the Trustee in writing that the Depositary is no longer willing or
able to act as a depositary and the Company is unable to locate a qualified
successor within 90 days or (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Notes in definitive
form under the Indenture, then, upon surrender by the relevant Global Note
Holder of its Global Note, Notes in such form will be issued to each person
that such Global Note Holder and the Depositary identifies as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary 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 Global Note Holder or the
Depositary for all purposes.
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, interest and liquidated damages) be made
in same-day funds. The Notes are expected to be eligible to trade in the
PORTAL Market and to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in the Notes will,
therefore, be required by the Depositary to be settled in same-day funds.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company and the Initial Purchaser entered into a Registration Rights
Agreement dated as of December 1, 1997. Pursuant to the Registration Rights
Agreement, the Company agreed to file with the Commission an Exchange Offer
Registration Statement with respect to the New Notes. Upon the effectiveness
of the Exchange Offer Registration Statement, the Company will offer, pursuant
to the Exchange Offer, to the Holders of Transfer Restricted Securities who
are able to make certain representations the opportunity to exchange their
Transfer Restricted Securities for New Notes. If (i) the Company is not
required to file the Exchange Offer Registration Statement because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any Holder of Transfer Restricted Securities notifies the Company within 20
days of the commencement of the Exchange Offer that (a) it is prohibited by
law or Commission policy from participating in the Exchange Offer or (b) 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
Exchange Offer Registration Statement is not appropriate or available for such
resales or (c) it is a broker-dealer and holds Notes acquired directly from
the Company or an affiliate of the Company, the Company 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
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 or New Note
until (i) the date on which such Note or New Note has been exchanged by a
person other than a broker-dealer for a New Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Note for
a New Note, the date on which such New Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy
of the prospectus contained in the Exchange Offer Registration Statement,
(iii) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Note or New Note is distributed to
the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 45
days after the Issue Date, (ii) the Company will use its best efforts to have
the Exchange Offer Registration Statement declared effective by the Commission
on or prior to 90 days after the Issue Date, (iii) unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will
commence the Exchange Offer and will use its best efforts to issue on or prior
to 45 days after the date on which the Exchange Offer Registration Statement
is declared effective by the Commission (the "Exchange Offer Effective Date")
New Notes in exchange for all Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the
Company will use its best efforts to file the Shelf Registration Statement
with the Commission on or prior to 45 days after such obligation arises and to
cause the Shelf Registration Statement to be declared effective by the
Commission on or prior to 90 days after such obligation arises. If (a) the
Company fails to file within 45 days, or cause to become effective within 90
days, the Exchange Offer Registration Statement or (b) the Company is
obligated to file the Shelf Registration Statement and such Shelf Registration
Statement is not filed within 45 days, or declared effective within 90 days,
of the date on which the Company became so obligated or (c) the Company fails
to consummate the Exchange Offer within 45 days of the Exchange Offer
Effective Date 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 will pay liquidated damages ("Liquidated Damages")
to each Holder of Transfer Restricted Securities, during 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
constituting Transfer Restricted Securities held by such Holder. The amount of
the Liquidated Damages will increase an additional $.05 per week per $1,000
principal amount constituting Transfer Restricted Securities for each
subsequent 90-day period until the applicable Registration Default has been
cured, up to a maximum amount of Liquidated Damages of $.30 per week per
$1,000 principal amount of Notes constituting Transfer Restricted
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Securities. All accrued Liquidated Damages will be paid by the Company on each
Damages Payment Date to the Global Note Holder by wire transfer of immediately
available funds or by federal funds check and to the Holders of certificated
securities by mailing a check to such Holders' registered addresses. Following
the cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of the Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement within the time
periods set forth in the Registration Rights Agreement in order to have their
Senior Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth above.
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
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 that 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 during which the
Exchange Offer is open, the term "Expiration Date" means the latest time and
date to which the Exchange Offer is extended.
As of the date of this Prospectus, $175,000,000 aggregate principal amount
of 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 customary
conditions as set forth below under "--Certain Conditions to the Exchange
Offer."
The Company expressly reserves the right, at any time and from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby to delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders of the Old Notes as described
below. During any such extension, all Old Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of $1,000
or any integral multiple thereof.
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 to the Exchange
Offer specified below under "--Certain Conditions to the Exchange Offer." The
Company will give oral or written notice of any extension, amendment, non-
acceptance or termination to the holders of the Old Notes as promptly as
practicable, such notice in the case of any extension to be issued by means of
a press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a holder thereof as
set forth below and the acceptance thereof by the Company will
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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 either (i) a properly completed and duly executed Letter of
Transmittal, including all other documents required by such Letter of
Transmittal, to PNC Bank, National Association (the "Exchange Agent") at one
of the addresses set forth below under "Exchange Agent," or (ii) if such Old
Notes are tendered pursuant to the procedures for book-entry transfer set
forth below, a holder tendering Old Notes may transmit an Agent's Message
(defined herein) to the Exchange Agent in lieu of the Letter of Transmittal,
in either case 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, (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
("DTC" or the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, along with the Letter of Transmittal on
an Agent's Message, as the case may be, 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 term "Agent's Message"
means a message, transmitted to the Book-Entry Transfer Facility and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgement from the tendering Participant (defined herein) that such
Participant has received and agrees to be bound by the Letter of Transmittal
and that the Company may enforce the Letter of Transmittal against such
Participant.
THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL OR AGENT'S
MESSAGE 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.
Any beneficial owner of Old Notes whose Old Notes are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee and who
wishes to tender such Old Notes in the Exchange Offer should contact the
registered holder promptly and instruct such registered holder to tender on
such beneficial owner's behalf. If such beneficial owner wishes to tender on
its own behalf, such owner must, prior to completing and executing the Letter
of Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of such Old Notes in such
beneficial owner's name or obtain a properly completely bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal Rights"), as the case may be, must be guaranteed
(see"--Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of those 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 guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a 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 exactly as the name or names of the
registered holder or holders appear on the Old Notes 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
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final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Notes not properly tendered or not to accept
any particular Old Notes not properly tendered or the acceptance of which
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 by the Company 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) 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.
None of the Company, the Exchange Agent or 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.
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 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 with the Letter of Transmittal.
By tendering Old Notes for exchange, each holder will represent to the
Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to engage or participate in a 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 or 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
pursuant to the Exchange Offer, such holder or any such other person (i) may
not rely on the applicable interpretation 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 in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution." 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 NOTE
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" below. For
purposes of the Exchange Offer, the Company will 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.
For each Old Note accepted for exchange, the holder of such Old Note will
receive as set forth below under "Description of the New Notes--Book-Entry;
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. 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 December 1, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Accordingly, holders 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 for which the record date
occurs on or after consummation of the Exchange Offer. Old Notes not tendered
or not accepted for exchange will continue to accrue interest from and after
the date of consummation of the Exchange Offer.
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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 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, a properly completed and duly executed Letter of
Transmittal and all other required documents or, in the case of a Book-Entry
Confirmation, an Agent's Message in lieu thereof. 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 principal amount
than the holder desires to exchange, such unaccepted or non-exchanged 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 non-exchanged Old Notes will be credited to
an account maintained with such Book-Entry Transfer Facility) 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 a facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must in any case, be
transmitted to and received by the Exchange Agent at 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 timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) on or prior to 5:00 p.m., New York
City time, on 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,
substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of the 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 any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution 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 5:00 p.m., New
York City time, on 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
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Old Notes to be withdrawn (including the principal 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 in which case such guarantee will not be required. 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 will 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 maintained with
such Book-Entry Transfer Facility for the Old Notes) 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 provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, 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 New Notes for exchange, any of
the following events shall occur:
(i) any injunction, order or decree shall have been issued by any court
or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any applicable
interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time
in its sole 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
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
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 is threatened by the Commission or in effect
with respect to the Registration Statement of which this Prospectus is a part
or with respect to the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended.
The Exchange Offer is not conditioned on any minimum principal amount of Old
Notes being tendered for exchange.
EXCHANGE AGENT
PNC Bank, National Association has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
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PNC Bank, National Association, Exchange Agent
By Mail:
PNC Bank, National Association
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania 15222-2602
Attention: Fred J. Deramo
By Hand or Overnight Courier:
PNC Bank, National Association
One Oliver Plaza, 27th Floor
Pittsburgh, Pennsylvania 15222-2602
Attention: Fred J. Deramo
By Facsimile:
PNC Bank, National Association
Attention: Fred J. Deramo
Fax: (412) 762-8226
Confirm by Telephone:
(412) 762-3666
DELIVERY OF THE 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 other
soliciting acceptances of the Exchange Offer.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company.
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 taxes thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions
in the Indenture regarding transfer and exchange of the Old Notes and 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. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act. The Company does not currently anticipate
that it will register Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission, as set forth in no-action
letters issued to third parties, the Company believes that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes may be offered for
resale, resold or otherwise transferred by a holder thereof (other than a
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such New
Notes are
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acquired in the ordinary course of such holder's business and such holder,
other than a broker-dealer, has no arrangement or understanding with any
person to engage or participate in a distribution of such New Notes. However,
the Commission has not considered the Exchange Offer in the context of a no-
action letter request by the Company 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 such 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 or 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) may 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 in exchange for Old Notes pursuant
to the Exchange Offer 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. 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, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
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FEDERAL INCOME TAX CONSEQUENCES OF OWNING NEW NOTES
U.S. HOLDERS
Payments of Interest. The Old Notes were not issued with original issue
discount. As a result, payments of interest on a New Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received, in accordance with the U.S. Holder's regular
method of tax accounting.
Market Discount. A Note will be considered to bear "market discount" if the
U.S. Holder's tax basis for the Note is less than the principal amount of the
Note by more than a de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment on, or any gain realized on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the extent of
the lesser of (i) the amount of such payment or realized gain or (ii) the
market discount which has not previously been included in income and is
treated as having accrued on such New Note at the time of such payment or
disposition. Market discount will be considered to accrue on a straight-line
basis during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on the basis
of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a New Note with market discount until the maturity of the
New Note or certain earlier dispositions. A. U.S. Holder may elect to include
market discount in income currently as it accrues, in which case the rules
described above regarding the treatment as ordinary income of gain upon the
disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Persons
considering making this election should consult their tax advisors.
Premium. If a U.S. Holder's initial tax basis in any Note is greater than
the principal amount of the Note, the Note will be considered to have
"amortizable bond premium" equal in amount to such excess. A U.S. Holder may
elect to amortize such premium using a constant yield method over the
remaining term of the New Note and may offset interest otherwise required to
be included in respect of the New Note during any taxable year by the
amortized amount of such excess for the taxable year. Any election to amortize
bond premium applies to all taxable debt instruments acquired by the U.S.
Holder on or after the first day of the first taxable year to which such
election applies and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a New Note, a U.S. Holder generally will recognize taxable gain
or loss equal to the difference between the amount realized on the sale,
exchange or retirement (other than amounts representing accrued and unpaid
interest) and such U.S. Holder's adjusted tax basis in the New Note. A U.S.
Holder's adjusted tax basis in a New Note generally will equal such U.S.
Holder's initial investment in the Note increased by any accrued market
discount that the U.S. Holder has included in income and decreased by the
amount of any amortizable bond premium taken with respect to such Note. Such
gain or loss generally will taxed at preferential tax rates if the Note has
been held for more than eighteen months.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a New Note, unless such non-U.S. Holder is a direct
or indirect 10% or greater shareholder of the Company or a controlled foreign
corporation related to the Company. To qualify for the exemption from
taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in
the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial
owner of the New Note under penalties of perjury, (ii) certifies that such
owner is not a U.S. Holder and (iii) provides the name and address of the
beneficial owner. The statement may be made
113
<PAGE>
on an IRS Form W-8 or a substantially similar form, and the beneficial owner
must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a New Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide a signed statement to the Withholding
Agent. However, in such case, the signed statement must be accompanied by a
copy of the IRS Form W-8 or the substitute form provided by the beneficial
owner to the organization or institution.
Generally, a non-U.S. Holder will not be subject to federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
New Note, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The New Notes will not be includible in the estate of a non-U.S. Holder
unless the individual is a direct or indirect 10% or greater shareholder of
the Company or, at the time of such individual's death, payments in respect of
the New Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.
BACKUP WITHHOLDING; INFORMATION REPORTING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the New Notes to registered owners who
are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the New Notes to a U.S. Holder must be reported to
the IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for
those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a New Note to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller
is a non-U.S. Holder (and certain other conditions are met). Such a sale must
also be reported by the broker to the IRS unless either (a) the broker
determines that the seller is an exempt recipient or (b) the seller certifies
its non-U.S. status (and certain other conditions are met). Certification of
the registered owner's non-U.S. status would be made normally on an IRS Form
W-8 under penalties of perjury, although in certain cases it may be possible
to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the IRS.
114
<PAGE>
PLAN OF DISTRIBUTION
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. 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,
starting on the Expiration Date and ending on the close of business on the
180th day following the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until 199 , all dealers effecting
transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. 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 at 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 and/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 an
"underwriter" within the meaning of the Act and any profit of 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.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. Additional copies of this Prospectus,
the Letter of Transmittal and other related documents may be obtained upon
request to the Exchange Agent at (412) 762-3666. The Company has agreed to pay
all expenses incident to the Exchange Offer (including the expenses of any one
special counsel for the holders of the Notes) other than commissions or
concessions of any brokers or dealers and will indemnify the holders of the
Notes participating in the Exchange Offer (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the New Notes will be passed upon
on behalf of the Company by Dickie, McCamey & Chilcote, P.C., Pittsburgh,
Pennsylvania. Clayton A. Sweeney is both a shareholder and Director in the
firm and a Director of the Company.
115
<PAGE>
EXPERTS
The Consolidated Financial Statements and schedule of the Company at
December 31, 1995 and 1996, and for each of the three years in the period
ended December 31, 1996, appearing in this Prospectus and the Registration
Statement on Form S-4 (together with all amendments and exhibits thereto, the
"Registration Statement") have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
in the Registration Statement. The consolidated financial statements of
Koppers Australia at June 30, 1996 and 1997 and for the years then ended
appearing in the Registration Statement have been audited by Ernst & Young,
independent auditors, as set forth in their report thereon appearing in the
Registration Statement. The financial statements referred to above are
included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed the Registration Statement with the Commission under
the Securities Act, with respect to the Notes offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain portions of which have been omitted in accordance with the
rules and regulations of the Commission. For further information with respect
to the Company and the Notes offered hereby, reference is made to the
Registration Statement which may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and at 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may also be obtained upon payment of the
fees prescribed by the Commission from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and in each case reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each statement being qualified in all respects by such
reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith, files reports and other information with the
Commission. Such reports and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional
Offices located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and at 7 World Trade Center, 13th Floor, New
York, New York 10048, and copies may be obtained at the prescribed rates from
the Public Reference Section of the Commission at its principal office in
Washington, D.C. In addition, the Commission maintains a site on the Internet
that contains reports, proxy statements and other information regarding
registrants that file electronically with the Commission at
http://www.sec.gov.
116
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Koppers Industries, Inc.
Consolidated Financial Statements for the Years Ended December 31, 1994,
1995 and 1996
Report of Independent Auditors........................................... F-2
Consolidated Statement of Operations for the Years Ended December 31,
1994, 1995 and 1996..................................................... F-3
Consolidated Balance Sheet at December 31, 1995 and 1996................. F-4
Consolidated Statement of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996..................................................... F-6
Consolidated Statement of Stockholders' Equity for the Years Ended
December 31, 1994, 1995 and 1996........................................ F-7
Notes to Consolidated Financial Statements............................... F-8
Condensed Consolidated Financial Statements (Unaudited) for the Nine
Months Ended September 30, 1996 and 1997
Condensed Consolidated Statement of Operations (Unaudited) for the Nine
Months Ended September 30, 1996 and 1997................................ F-24
Condensed Consolidated Balance Sheet (Unaudited) at September 30, 1997
and December 31, 1996................................................... F-25
Condensed Consolidated Statement of Cash Flows (Unaudited) for the Nine
Months Ended September 30, 1996 and 1997................................ F-27
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-28
Koppers Australia Pty. Limited
Consolidated Financial Statements for the Years Ended June 30, 1996 and
1997 Report of Independent Auditors...................................... F-30
Consolidated Profit and Loss Account for the Years Ended June 30, 1996
and 1997................................................................ F-31
Consolidated Balance Sheet at June 30, 1996 and 1997..................... F-32
Consolidated Statement of Cash Flows for the Years Ended June 30, 1996
and 1997................................................................ F-33
Profit and Loss Account for the Years Ended June 30, 1996 and 1997....... F-34
Balance Sheet at June 30, 1996 and 1997.................................. F-35
Statement of Cash Flows for the Years Ended June 30, 1996 and 1997....... F-36
Notes to and Forming Part of the Financial Statements.................... F-37
Condensed Consolidated Financial Statements (Unaudited) for the Three
Months Ended September 30, 1996 and 1997
Condensed Consolidated Profit and Loss Account (Unaudited) for the Three
Months Ended September 30, 1996 and 1997................................ F-56
Condensed Consolidated Balance Sheet (Unaudited) at September 30, 1997... F-57
Condensed Consolidated Statement of Cash Flows (Unaudited) for the Three
Months Ended September 30, 1996 and 1997................................ F-58
Notes to Condensed Consolidated Financial Statements (Unaudited)......... F-59
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Koppers Industries, Inc.
We have audited the accompanying consolidated balance sheet of Koppers
Industries, Inc. at December 31, 1995 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Koppers Industries, Inc. at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 18, 1997
F-2
<PAGE>
KOPPERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1995 1996
<S> <C> <C> <C>
Net sales......................................... $476,448 $525,730 $588,544
Operating expenses:
Cost of sales................................... 407,533 440,746 496,062
Depreciation and amortization................... 16,680 17,532 21,793
Selling, general and administrative............. 24,068 27,604 27,545
Restructuring charges........................... 2,458 -- 15,513
-------- -------- --------
Total operating expenses...................... 450,739 485,882 560,913
-------- -------- --------
Operating profit.................................. 25,709 39,848 27,631
Equity in earnings of affiliates.................. 5,314 9,239 9,587
Other income...................................... 531 376 --
Litigation charges................................ -- -- 12,623
-------- -------- --------
Income before interest expense and provision for
income taxes...................................... 31,554 49,463 24,595
Interest expense.................................. 13,620 15,060 16,636
-------- -------- --------
Income before income tax provision (benefit)...... 17,934 34,403 7,959
Income tax provision (benefit).................... 5,017 9,963 (6,139)
-------- -------- --------
Income before extraordinary item.................. 12,917 24,440 14,098
Extraordinary loss on early extinguishment of
debt, net of income taxes......................... (1,815) -- --
-------- -------- --------
Net income........................................ 11,102 24,440 14,098
Payment-in-kind dividends on preferred stock...... 944 -- --
-------- -------- --------
Net income applicable to common stock............. $ 10,158 $ 24,440 $ 14,098
======== ======== ========
Earnings (loss) per share of common stock:
Earnings before extraordinary item.............. $ 1.13 $ 2.36 $ 1.47
Extraordinary item.............................. (0.17) -- --
-------- -------- --------
Earnings per share of common stock................ $ 0.96 $ 2.36 $ 1.47
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
KOPPERS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash................................................... $ 1,618 $ 1,526
Accounts receivable less allowance for doubtful
accounts of $342 in 1995 and $164 in 1996........... 57,583 72,229
Inventories:
Raw materials........................................ 38,584 33,635
Work in process...................................... 2,419 3,168
Finished goods....................................... 44,363 44,090
LIFO reserve......................................... (8,191) (7,971)
--------- ---------
Total inventories.................................. 77,175 72,922
Deferred tax benefit................................... 5,896 10,927
Other.................................................. 1,732 2,662
--------- ---------
Total current assets............................... 144,004 160,266
Investments:
Koppers Australia Pty. Limited......................... 30,223 37,561
Tarconord.............................................. 15,149 13,673
Koppers Sherman-Abetong................................ 3,669 4,139
--------- ---------
Total investments.................................. 49,041 55,373
Fixed assets:
Land................................................... 5,523 5,673
Buildings.............................................. 9,736 10,173
Machinery and equipment................................ 233,652 280,842
--------- ---------
248,911 296,688
Less: accumulated depreciation....................... (102,388) (123,468)
--------- ---------
Net fixed assets................................... 146,523 173,220
Other assets............................................. 9,387 22,321
--------- ---------
Total assets....................................... $ 348,955 $ 411,180
========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
KOPPERS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 33,237 $ 37,255
Payroll and compensation costs........................... 8,956 11,300
Accrued liabilities...................................... 12,716 26,874
Current portion of term loan............................. 9,000 7,149
-------- --------
Total current liabilities.............................. 63,909 82,578
Long-term debt:
Revolving credit......................................... 29,000 43,000
Term loan................................................ 26,000 49,735
Senior Notes............................................. 110,000 110,000
-------- --------
Total long-term debt................................... 165,000 202,735
Deferred income tax........................................ 12,788 6,904
Product warranty and insurance reserves.................... 14,492 17,379
Accrued postretirement benefits obligation................. 12,275 15,675
Other...................................................... 2,261 7,846
-------- --------
Total liabilities...................................... 270,725 333,117
Commitments and contingencies--See Note 11
Series B Junior Convertible Preferred Stock; 2,600 shares
designated and issued; liquidation value of $100 per
share..................................................... 260 --
Common stock subject to redemption......................... 23,715 23,957
Voting Common Stock, $.01 par value:
10,000,000 shares authorized, 6,707,952 total shares
issued in 1995
and 1996.................................................. 67 67
Non-Voting Common Stock, $.01 par value:
10,000,000 shares authorized, 2,338,200 total shares
issued in 1995
and 3,628,200 in 1996..................................... 23 36
Capital in excess of par value............................. 12,964 11,675
Retained earnings.......................................... 45,828 45,813
Cumulative translation adjustment.......................... (384) 2,181
Treasury stock, at cost, 1,433,961 shares in 1995 and
1,531,511 shares
in 1996................................................... (4,243) (5,666)
-------- --------
Total liabilities and stockholders' equity............. $348,955 $411,180
======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
KOPPERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Cash provided by operating activities:
Net income.................................. $ 11,102 $ 24,440 $ 14,098
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 16,884 17,532 21,793
Deferred income taxes..................... 349 3,835 (10,915)
Equity income of affiliated companies, net
of dividends received.................... (3,902) (6,568) (3,767)
Extraordinary loss on early extinguishment
of debt.................................... 1,815 -- --
Restructuring reserves...................... 2,046 (2,046) 14,990
Increase in reserves........................ 677 955 5,086
(Increase) decrease in working capital:
Accounts receivable....................... 3,165 (5,774) (4,626)
Inventories............................... 841 (9,724) 9,281
Accounts payable.......................... (2,323) 11,474 (5,433)
Payroll and compensation costs............ 1,999 1,120 (710)
Accrued liabilities....................... 4,924 766 5,985
Other..................................... 1,672 (734) (1,038)
--------- --------- ---------
Net cash provided by operating
activities............................. 39,249 35,276 44,744
--------- --------- ---------
Cash used in investing activities:
Acquisitions and related capital
expenditures............................... -- (34,948) (39,517)
Capital expenditures........................ (16,326) (15,193) (21,717)
Other....................................... 310 (202) 320
--------- --------- ---------
Net cash used in investing activities..... (16,016) (50,343) (60,914)
--------- --------- ---------
Cash used in financing activities:
Borrowings of revolving credit.............. 110,000 150,000 160,500
Repayments of revolving credit.............. (126,000) (155,000) (146,500)
Repayment of long term debt................. (51,750) (5,000) (14,046)
Proceeds from long term debt................ -- 25,000 35,930
Proceeds from issuance of Senior Notes...... 110,000 -- --
Retirement of preferred stock............... (53,452) -- --
Payments of deferred financing costs........ (5,425) -- (1,217)
Purchases of voting common stock............ (3,820) (1,637) (3,247)
Purchases of non-voting common stock........ -- -- (12,250)
Proceeds from exercise of warrants.......... -- 2,667 --
Dividends on common stock................... -- (2,320) (3,092)
--------- --------- ---------
Net cash provided by (used in) financing
activities................................... (20,447) 13,710 16,078
--------- --------- ---------
Net increase (decrease) in cash............... 2,786 (1,357) (92)
Cash at beginning of year..................... 189 2,975 1,618
--------- --------- ---------
Cash at end of year........................... $ 2,975 $ 1,618 $ 1,526
========= ========= =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest.................................. $ 9,551 $ 15,135 $ 15,843
Income taxes.............................. 3,692 7,399 2,315
</TABLE>
See accompanying notes.
F-6
<PAGE>
KOPPERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES B
JUNIOR COMMON
CONVERTIBLE STOCK VOTING NON-VOTING CAPITAL IN CUMULATIVE
PREFERRED SUBJECT TO STOCK COMMON COMMON EXCESS OF RETAINED TRANSLATION TREASURY
STOCK REDEMPTION WARRANTS STOCK STOCK PAR VALUE EARNINGS ADJUSTMENT STOCK
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... $ 260 $ 800 $873 $67 $-- $ 8,789 $ 33,308 $(4,805) $(1,368)
Net income to common
stock for 1994......... -- -- -- -- -- -- 10,158 -- --
Foreign currency
translation............ -- -- -- -- -- -- -- 4,182 --
Net change in common
stock subject
to redemption.......... -- 14,650 -- -- -- (1,767) (12,883) -- --
Redemption of preferred
stock.................. -- -- -- -- -- -- 3,756 -- --
Options exercised, stock
purchased and retired,
12,768 shares.......... -- -- -- -- -- -- (342) -- --
Treasury stock
purchases, 65,796
shares................. -- -- -- -- -- -- -- -- (2,084)
Redemption of voting
common stock........... -- -- -- -- -- (147) (1,247) -- --
----- ------- ---- --- --- ------- -------- ------- -------
Balance at December 31,
1994................... 260 15,450 873 67 -- 6,875 32,750 (623) (3,452)
Net income to common
stock for 1995......... -- -- -- -- -- -- 24,440 -- --
Foreign currency
translation............ -- -- -- -- -- -- -- 239 --
Net change in common
stock subject to
redemption............. -- 8,265 -- -- -- -- (8,265) -- --
Options exercised, stock
purchased and retired,
15,583 shares.......... -- -- -- -- -- -- (435) -- --
Treasury stock
purchases, 53,671
shares................. -- -- -- -- -- -- -- -- (1,707)
Treasury stock sales,
27,451 shares.......... -- -- -- -- -- -- -- -- 916
Warrants exercised,
2,799,950 shares....... -- -- (873) -- 23 6,158 -- -- --
Common stock repurchased
and retired, 61,650
shares................. -- -- -- -- -- (69) (342) -- --
Dividends on common
stock, net of equity
interest............... -- -- -- -- -- -- (2,320) -- --
----- ------- ---- --- --- ------- -------- ------- -------
Balance at December 31,
1995................... 260 23,715 -- 67 23 12,964 45,828 (384) (4,243)
Net income to common
stock for 1996......... -- -- -- -- -- -- 14,098 -- --
Foreign currency
translation............ -- -- -- -- -- -- -- 2,565 --
Net change in common
stock subject
to redemption.......... -- 242 -- -- -- -- (242) -- --
Options exercised, stock
purchased and retired,
54,062 shares.......... -- -- -- -- -- -- (485) -- --
Treasury stock
purchases, 292,433
shares................. -- -- -- -- -- 420 -- -- (3,835)
Treasury stock sales,
194,883 shares......... -- -- -- -- -- -- -- -- 2,412
Conversion of Series B
Preferred Stock........ -- -- -- -- 23 237 -- -- --
Non-voting common stock
repurchased and
retired, 1,050,000
shares................. (260) -- -- -- (10) (1,946) (10,294) -- --
Dividends on common
stock, net of equity
interest............... -- -- -- -- -- -- (3,092) -- --
----- ------- ---- --- --- ------- -------- ------- -------
Balance at December 31,
1996................... $ -- $23,957 $ -- $67 $36 $11,675 $ 45,813 $ 2,181 $(5,666)
===== ======= ==== === === ======= ======== ======= =======
</TABLE>
See accompanying notes.
F-7
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.SIGNIFICANT ACCOUNTING POLICIES
Organization
Koppers Industries, Inc. (the "Company") is an integrated producer of carbon
compounds and treated wood products for use in a variety of industrial
applications. The Company's Carbon Materials & Chemicals division is a
supplier of carbon pitch, which is used primarily by the aluminum industry as
a binder in the manufacture of anodes. Carbon Materials & Chemicals also
produces several by-products, including creosote, a chemical preservative used
to pressure treat wood for the railroad and utility markets; phthalic
anhydride, used in the production of plasticizers and polyester resins; and
roofing pitch, or bitumen, used in the manufacture of built-up roofing
systems. The Company's Railroad & Utility Products division treats railroad
crossties, utility poles and pilings with preservatives for various uses. The
Company's Coke Products division produces foundry and furnace coke for sale to
steel mill blast furnaces and foundries, and coke by-products, including coal
tars, gases, oils and chemicals for sale to other industrial operations.
Basis of Financial Statements
The consolidated financial statements include the accounts of the Company
and all majority-owned subsidiaries. All significant intercompany transactions
have been eliminated.
The Company's investments in 20% to 50% owned companies in which it has the
ability to exercise significant influence over operating and financial
policies are accounted for on the equity method. Accordingly, the Company's
share of the earnings of these companies is included in consolidated net
income.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventories
Carbon Materials & Chemicals and Railroad & Utility Products inventories are
valued at the lower of cost, utilizing the last-in, first-out ("LIFO") basis,
or market. Market represents replacement cost for raw materials and net
realizable value for work in process and finished goods. Carbon Materials &
Chemicals and Railroad & Utility Products inventories constituted
approximately 90% of total first-in, first-out ("FIFO") inventory value at
December 31, 1996.
Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.
Investments
Following is a combined financial summary of the equity investments of the
Company for their respective years ended 1994, 1995 and 1996. The fiscal year
end for Koppers Australia Pty. Limited is June 30 and, accordingly, the equity
numbers reflected in the table will not equal the amounts shown in the
financial statements.
F-8
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales............................................ $166,652 $203,639 $266,439
Operating profit..................................... 16,980 28,303 32,126
Net income........................................... 11,901 19,154 21,530
Equity in earnings................................... 5,951 9,577 10,765
Current assets....................................... 68,679 88,776 94,058
Total assets......................................... 152,519 171,550 201,310
Current liabilities.................................. 27,721 41,437 55,077
Non-current liabilities.............................. 30,451 23,951 33,405
Net assets........................................... 94,347 106,162 112,828
</TABLE>
The following describes activity related to the Company's significant equity
investments for the years ended December 31:
KOPPERS AUSTRALIA PTY. LIMITED ("KOPPERS AUSTRALIA")
The Company holds a 50% investment in Koppers Australia, a carbon materials,
wood treating and wood preservation operation.
<TABLE>
<CAPTION>
EQUITY INCOME DIVIDENDS RECEIVED
<S> <C> <C>
1994........................................... $3,614,000 $ 360,000
1995........................................... 4,998,000 712,000
1996........................................... 6,540,000 2,769,000
</TABLE>
TARCONORD A/S ("TARCONORD")
The Company owns a 50% equity interest in Tarconord, a carbon materials
operation headquartered in Denmark, with operations in Denmark and the United
Kingdom.
<TABLE>
<CAPTION>
EQUITY INCOME DIVIDENDS RECEIVED
<S> <C> <C>
1994........................................... $ 738,000 $ 562,000
1995........................................... 3,139,000 731,000
1996........................................... 1,577,000 2,430,000
</TABLE>
KOPPERS/SHERMAN--ABETONG ("KSA")
The Company holds a 50% investment in KSA, a concrete crosstie operation
located in Ohio.
<TABLE>
<CAPTION>
EQUITY INCOME DIVIDENDS RECEIVED
<S> <C> <C>
1994........................................... $ 962,000 $ 500,000
1995........................................... 1,102,000 1,500,000
1996........................................... 1,470,000 1,000,000
</TABLE>
The Company is guarantor on KSA debt in the amount of $1.9 million at
December 31, 1996.
Depreciation and Amortization
Buildings, machinery, and equipment are recorded at purchased cost and
depreciated over their estimated useful lives (5 to 20 years) using the
straight-line method.
Effective July 1, 1994 the Company extended the estimated useful lives of
certain fixed assets to conform to the Company's actual experience with fixed
asset lives. This change resulted in a reduction to depreciation expense for
1994 of approximately $1.35 million.
F-9
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Accrued Insurance
The Company is self-insured for property, casualty and workers' compensation
insurance up to various stop loss coverages. Losses are accrued based upon the
Company's estimates of the aggregate liability for claims incurred using
certain actuarial assumptions followed in the insurance industry and based on
Company experience.
Research and Development
Research and development costs, which are included in selling, general and
administrative expenses, amounted to $0.9 million for both 1994 and 1995, and
$1.0 million for 1996.
Reclassification
Certain amounts in the prior years' consolidated financial statements have
been reclassified to conform to the current year presentation. Such
reclassification had no effect on net income.
Impact of Recently Issued Accounting Standards
In March 1995 the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of 1996 and the effect of
adoption was not material.
2.RESTRUCTURING CHARGES
The restructuring charges of $15.5 million for 1996 include $6.5 million for
the closing of a tar distillation facility in Houston, Texas; $0.9 million
related to the closing of a refractory materials facility in Carrollton, Ohio;
$5.4 million related to the idling of part of the coke operations at the
Company's Woodward, Alabama coke facility; and $2.6 million for severance
charges unrelated to the closing of these facilities; and $0.1 million for
other.
The total restructuring charges consist of the following cash and non-cash
charges (in millions):
<TABLE>
<S> <C>
Non-cash
Write-downs of equipment................................................ $4.1
Cash
Dismantling and tank cleaning........................................... $3.6
Severance............................................................... $3.3
Other................................................................... $4.5
</TABLE>
At December 31, 1996 approximately $0.5 million of the total cash charges
had been expended with the remainder to be expended in 1997.
F-10
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Results for 1994 included a $2.5 million expense related to a voluntary
severance plan initiated by the Company as part of a general corporate
restructuring. The total charge reflected salaries and benefits for 55
participating employees.
3.ACQUISITIONS
In March 1995, the Company acquired a wood treating plant and certain assets
located in Somerville, Texas for $9.8 million. In April 1995, the Company
acquired a coke plant and certain assets located in Monessen, Pennsylvania for
$5 million. The Somerville plant began production in April 1995, and the
Monessen plant began production in November 1995. Both were accounted for as
purchases, and results of operations have been included since the dates of
acquisition. The pro forma effect of these acquisitions on the 1994 and 1995
results of the Company is not material.
On April 1, 1996, the Company purchased a tar distillation plant and certain
assets located in Clairton, Pennsylvania for a cash purchase price of
approximately $40 million and the assumption of approximately $8 million of
liabilities, primarily for employee benefits, tank cleaning and dismantling of
idle equipment. The acquisition was accounted for as a purchase and,
accordingly, operating results of this business subsequent to the date of
acquisition are included in the Company's consolidated financial statements.
The excess purchase price over fair value of the net tangible assets acquired
was approximately $12 million and has been recorded as goodwill which is being
amortized on a straight-line basis over 25 years.
The following table represents the pro forma results of the Company as if
the Clairton acquisition had taken place on January 1, 1995:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1995 1996
(MILLIONS
EXCEPT SHARE FIGURES)
<S> <C> <C>
Revenues (as reported)................................... $525.7 $588.5
Revenues (pro forma)..................................... 590.1 604.7
Net income (as reported)................................. 24.4 14.1
Net income (pro forma)................................... 27.5 14.7
Earnings per share (as reported)......................... 2.36 1.47
Earnings per share (pro forma)........................... $2.65 $1.52
Average shares outstanding............................... 10,376,658 9,619,713
</TABLE>
4.DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Revolving credit.............................................. $ 29,000 $ 43,000
Term loans.................................................... 35,000 56,884
Senior Notes.................................................. 110,000 110,000
-------- --------
$174,000 $209,884
======== ========
</TABLE>
In March 1996 the Company's existing credit agreement with Mellon Bank,
N.A., as agent, along with a syndicate of other lenders, was amended (the
"Amended and Restated Credit Agreement") to increase the revolving credit
facility (the "Revolving Credit Facility") to $100 million from $75 million,
which includes letters of credit subject to an aggregate sublimit of $15
million. Proceeds from this facility were used to repay the remaining $10
million term loan which had originated in February 1994. A new term loan was
also established in the amount of $35 million for the purchase of the tar
distillation plant and certain other assets from Aristech Chemical Corporation
(the "Clairton Term Loan"), with repayments of $17.5 million due for both 2000
and 2001.
F-11
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Revolving Credit Facility provides for revolving credit loans up to $100
million, based upon a percentage of accounts receivable and inventory, until
March 18, 2001. Commitment fees ranging from 0.2% to 0.375% per annum on the
unborrowed amounts are required. The notes provide for interest at variable
rates. At December 31, 1996, the effective interest rate on the Revolving
Credit Facility was 6.9%, and the average rates during the years ended
December 31, 1995 and 1996 were 8.5% and 6.9%, respectively.
In March 1995 the Company entered into a standby term loan agreement (as
amended in March 1996, the "Amended Somerville/Monessen Loan Agreement") to
finance the acquisitions and improvements of the Monessen coke plant and the
Somerville wood treating plant. The agreement provided for a $14 million term
loan for the Monessen plant and an $11 million term loan for the Somerville
plant. The balance on the loan requires repayments of $7 million in 1997, $9
million in 1998, and $5 million in 1999.
The term loans under the Amended Somerville/Monessen Loan Agreement provide
for interest at variable rates. At December 31, 1996 the effective rate on the
term loans was 6.3%. The average rates on the term loans for the years ended
December 31, 1995 and 1996 were 9.3% and 6.8%, respectively.
Substantially all of the Company's current assets (including accounts
receivable and inventories), as well as the fixed assets of Carbon Materials &
Chemicals, are pledged as collateral for the credit facilities established
under the Amended and Restated Credit Agreement, the Amended
Somerville/Monessen Loan Agreement and the Clairton Term Loan (collectively,
the "Bank Credit Facilities").
The Bank Credit Facilities contain certain covenants which limit capital
expenditures by the Company and restrict its ability to incur additional
indebtedness, create liens on its assets, enter into leases, and make
investments or acquisitions. In addition, such covenants give rise to events
of default upon the failure by the Company to meet certain financial ratios.
While in the past the Company has been able to obtain waivers from these
covenants to complete acquisitions and consents to exclude certain items from
the calculation of such ratios in order to avoid such events of default, there
can be no assurance that such waivers or consents will be obtained in the
future and therefore these restrictive covenants may limit the ability of the
Company to expand through acquisitions and may give rise to events of default
on the Bank Credit Facilities and adversely affect the Company's liquidity.
On February 10, 1994 the Company issued $110 million of 8.5% Senior Notes
maturing in 2004, with semiannual interest payments to the Note holders due
every February 1 and August 1.
At December 31, 1996 the aggregate debt maturities for the next five years
are as follows:
<TABLE>
<S> <C>
1997................................................................ $ 7,148,620
1998................................................................ 9,151,618
1999................................................................ 5,154,678
2000................................................................ 17,592,441
2001................................................................ 60,500,000
</TABLE>
The prepayment of debt on February 10, 1994 resulted in an extraordinary
loss of $1.8 million on a net-of-tax basis, comprised of write-offs of $1.9
million of original issue discount and $1.5 million of deferred financing
costs, net of a reduction of $1.6 million in put warrant liability. Deferred
financing costs associated with the refinancing totaled $5.3 million and are
being amortized over the life of the related debt.
Deferred financing costs (net of accumulated amortization of $0.8 million at
December 31, 1994, $1.6 million at December 31, 1995 and $2.4 million at
December 31, 1996) were $4.8 million, $4.3 million and $4.4 million, at
December 31, 1994, 1995 and 1996, respectively, and are included in other
assets.
At December 31, 1996, the Company had $8.5 million of standby letters of
credit outstanding, with terms ranging from one to two years.
F-12
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5.STOCK ACTIVITY
In March 1996, Cornerstone-Spectrum, Inc. exercised its option to convert
all of the Series B Convertible Preferred Stock into 2,340,000 shares of non-
voting common stock of the Company. Subsequent to the exercise, the Company
purchased and retired 1,050,000 shares of non-voting common stock of the
Company in equal amounts from Cornerstone-Spectrum, Inc. and APT Holdings
Corporation, a wholly owned subsidiary of Mellon Bank Corporation, the parent
of Mellon Bank, N.A. The effect of the purchase on stockholders' equity was to
decrease retained earnings and capital in excess of par value by $1.9 million
and $10.3 million, respectively.
Warrants held by lenders to purchase 2,399,850 shares of non-voting common
stock in connection with previous debt financings of the Company were
exercised during 1995 for $1.11 each. The Company repurchased and retired
61,650 of these shares for $0.4 million. The effect of the exercise of the
remaining 2,338,200 warrants resulted in a reduction to put warrant liability
of $2.6 million and a reduction in equity warrants of $0.9 million. Total
stockholders' equity was increased by $5.2 million as a result of the exercise
of warrants. There were no warrants outstanding at December 31, 1996.
All outstanding Series A preferred shares were redeemed in the amount of
$53.5 million in February 1994 by the Company, using a portion of the proceeds
from the Refinancing. In 1994 prior to the redemption the Company accrued
additional Series A dividends of $0.9 million.
In prior years the Company recorded payments to a subsidiary Koppers
Australia KAP Investments, Inc. ("KAP") as the Series A Exchangeable Preferred
Stock held by KAP as paid-in-kind dividends. A portion of these payments
represented an additional investment by the Company in KAP, as opposed to a
dividend which would have been eliminated under equity accounting.
Accordingly, in connection with the redemption of the Series A Exchangeable
Preferred Stock in February 1994, the investment in KAP was increased by $3.75
million, with a related increase to retained earnings. The effect on earnings
available to common stock and earnings per common share over the period from
1988 through the redemption date in 1994 is not material in any individual
year.
Treasury stock includes 1,125,000 shares held by KAP to reflect the
Company's 50% equity interest therein.
6.COMMON STOCK SUBJECT TO REDEMPTION
The Company has a Stockholders' Agreement (the "Stockholders' Agreement") in
place which requires the Company, subject to cash payment limitations under
the terms of existing debt covenants, to redeem certain shares of common stock
owned by members of management upon a "termination event" relative to a
management employee. A termination event is defined as retirement, death,
disability, termination or resignation. At December 31, 1995 and 1996 the
maximum redemptions which would have been required under the Stockholders'
Agreement were $23.7 million and $24.0 million, respectively. The value of
shares subject to redemption under the terms of the Stockholders' Agreement is
segregated from other common stock on the face of the balance sheet. There
were approximately 2.0 million and 1.7 million shares of voting common stock
at December 31, 1995 and 1996, respectively, subject to the provisions of this
Stockholders' Agreement. The Stockholders' Agreement expires on December 28,
1998, or upon an initial public offering (IPO) of common stock in which more
than 35% of the post-IPO voting common stock is sold, whichever is earlier.
The aggregate redemption amounts under the Agreement for the next three
years based on termination events which have already occurred are as follows:
<TABLE>
<S> <C>
1997............................................................... $1.9 million
1998............................................................... $0.8 million
1999............................................................... $0.2 million
</TABLE>
F-13
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7.BENEFIT PLANS
Pension
The Company has established benefit plans for its salaried employees and is
the sponsor of single employer defined benefit plans for the hourly employees.
Benefits under the plans are based upon employees' compensation and years of
service.
The funded status of the pension plans is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits............................................. $42,025 $46,080
Non-vested benefits......................................... 2,949 4,416
------- -------
Accumulated benefit obligation.............................. 44,974 50,496
Effect of future wage increases............................. 4,548 4,903
------- -------
Projected benefit obligation................................ 49,522 55,399
Plan assets at fair value..................................... 46,306 52,297
------- -------
Plan assets less than projected benefit obligation............ (3,216) (3,102)
Unrecognized prior service costs.............................. 324 453
Unrecognized net loss......................................... 4,695 2,758
------- -------
Prepaid pension costs (net of liabilities provided)........... $ 1,803 $ 109
======= =======
</TABLE>
The components of pension expense are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the year..... $ 2,273 $ 2,176 $ 3,121
Interest cost on projected benefit obligation..... 2,951 3,252 4,037
(Gain) loss on plan assets........................ 1,347 (9,969) (5,433)
Other............................................. (4,658) 6,861 868
-------- -------- --------
$ 1,913 $ 2,320 $ 2,593
======== ======== ========
</TABLE>
In determining the projected benefit obligation for funded status purposes,
discount rates of 7.25% and 7.5% were used for December 31, 1995 and 1996,
respectively. In 1995 and 1996, the assumed increase in future compensation was
4% for salaried employees and 3.5% for hourly employees. The long-term rate of
return on plan assets is assumed to be 9% annually. Plan assets consist of
common stock, fixed income securities and short-term investments. The Company
funds the plans currently based on ERISA requirements. The change in the
discount rate in 1996 decreased the accumulated benefit obligation by
approximately $1.4 million. The net increase in the accumulated benefit
obligation reflects the additional liabilities assumed by the Company as the
result of acquisitions.
Postretirement Benefits
The Company sponsors a defined postretirement benefit plan to provide medical
and life insurance benefits to employees who retire after attaining the
required years of service with the Company, including their spouses. Medical
benefits are provided through a comprehensive indemnity plan and community-
rated health maintenance organizations.
F-14
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Currently, the Company pays a portion of the cost of such plans, but
reserves the right to modify cost-sharing provisions in the future. Life
insurance benefits are based primarily on the employee's compensation and are
also partially paid for by retiree contributions, which vary based upon
coverage chosen by the retiree.
In determining the accumulated postretirement benefit obligation at December
31, 1995 and 1996, the Company used discount rates of 7.25% and 7.5%,
respectively. Inflation factors for the different types of medical costs were
assumed to range from 8.0% to 10.6% for 1997 and to decrease gradually to 6.7%
per year within 11 years.
The following summarizes the Company's accrued obligation:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Active employees........................................... $ 9,920 $12,318
Retired employees.......................................... 1,571 1,841
------- -------
Total.................................................... 11,491 14,159
Plan assets.................................................. -- --
------- -------
Accumulated postretirement benefit obligation in excess of
plan assets................................................. 11,491 14,159
Unrecognized prior service cost.............................. 2,979 2,853
Unrecognized net gain........................................ (2,063) (1,286)
------- -------
Accrued postretirement benefit obligation.................... $12,407 $15,726
======= =======
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................... $ 410 $ 345 $ 474
Interest cost..................................... 747 739 798
Net amortization and deferrals.................... (192) (368) (313)
-------- -------- --------
Net periodic postretirement benefit cost.......... $ 965 $ 716 $ 959
======== ======== ========
</TABLE>
An increase of 1% in the assumed medical cost inflation rate as of the
beginning of the projection period would increase the accumulated
postretirement benefit obligation by 9.2% and would increase the net
postretirement benefit cost by 12.6%.
Incentive Plan
The Company has established a Management Incentive Plan based on established
target award levels for each participant if certain Company performance and
individual goals are met. The charge to operating expense for this plan was
$2.2 million in 1994, $4.1 million in 1995, and $2.9 million in 1996. For
incentive related to 1995 and 1996 results, participating employees may elect
to receive up to 50% of their incentive compensation in voting common stock of
the Company.
Employee Savings Plan
The Company has established an Employee Savings Plan for all eligible
salaried employees that conforms to Section 401(k) of the Internal Revenue
Code. Under the plan, participating employees can elect to contribute
F-15
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
up to 16% of their salaries with a regular Company matching contribution
equivalent to 100% of the first 1% plus 50% of the next 2% of tax-saver
contributions.
The Company's regular contributions amounted to $0.4 million in 1994 and $0.6
million in both 1995 and 1996. The Company may also make a supplemental
contribution at the end of each Plan Year subject to Board approval.
Supplemental contributions of $0.2 million, $1.1 million and $0.5 million were
made in 1994, 1995 and 1996, respectively. Effective in January 1995, all
regular and supplemental matching contributions have been made in voting common
stock of the Company held in Treasury.
8.INCOME TAXES
Components of the Company's provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal.......................................... $3,707 $5,133 $ 3,904
State and foreign................................ 961 995 872
------- ------- ---------
Total current tax provision.................... 4,668 6,128 4,776
Deferred
Federal.......................................... 632 3,592 (9,965)
State............................................ (283) 243 (950)
------- ------- ---------
Total deferred tax provision (benefit)......... 349 3,835 (10,915)
------- ------- ---------
Total provision (benefit) for income taxes......... $5,017 $9,963 $ (6,139)
======= ======= =========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets (including deferred items
reflected as extraordinary loss) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1995 1996
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation.................................. $23,751 $25,184
Other....................................................... 1,780 2,354
------- -------
Total deferred tax liabilities............................ 25,531 27,538
Deferred tax assets:
Alternative minimum tax credits............................. 1,288 5,022
OPEB obligation............................................. 4,892 6,237
Reserves, including insurance and product warranty.......... 6,999 14,584
Book/tax inventory accounting............................... 2,133 1,963
Accrued vacation pay........................................ 1,254 1,292
Other....................................................... 2,073 2,463
------- -------
Total deferred tax assets................................. 18,639 31,561
------- -------
Net deferred tax liabilities (assets)..................... $ 6,892 $(4,023)
======= =======
</TABLE>
F-16
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision (benefit) for income taxes is reconciled with the federal
statutory rate as follows:
<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Federal..................................................... 35.0% 35.0% 35.0%
State, net of federal tax benefit........................... 3.2 2.1 (3.7)
Equity earnings of foreign affiliates....................... (8.5) (8.3) (35.7)
Foreign taxes............................................... 0.6 0.4 10.0
Section 29 credit........................................... -- -- (87.9)
Other....................................................... (2.3) (0.2) 5.2
---- ---- -----
28.0% 29.0% (77.1)%
==== ==== =====
</TABLE>
The Company has not provided any U.S. tax on undistributed earnings of
foreign subsidiaries or joint ventures that are reinvested indefinitely. At
December 31, 1996 consolidated retained earnings of the Company included
approximately $27 million of undistributed earnings from these investments.
The Company began earning non-conventional fuels credits on coke production
at its Monessen facility during 1996. Credits earned during the period were
approximately $7 million.
The Company has an alternative minimum tax credit carryforward of
approximately $5 million. The credit has no expiration date.
9.EARNINGS PER SHARE
Earnings per share have been computed on the basis of the average number of
common shares outstanding. Earnings per share assume that all granted warrants
and options were exercised with proceeds used to repurchase shares of common
stock at average market value. Shares held by KAP have been reduced to reflect
the Company's 50% ownership interest therein.
For purposes of determining earnings per share, all Series B Junior
Convertible Preferred Stock is assumed to have been converted into non-voting
Common Stock.
Weighted-average Common Stock considered to be outstanding:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Voting Common Stock............................. 5,545,230 5,351,907 5,290,151
Non-voting Common Stock (includes conversion
of Series B Convertible Preferred Stock)....... 2,340,000 4,678,200 3,867,749
Common Stock Equivalents........................ 2,685,741 346,551 461,813
---------- ---------- ---------
10,570,971 10,376,658 9,619,713
========== ========== =========
</TABLE>
Common shares outstanding have been computed assuming the exercise of
warrants and management stock options, using the treasury stock method.
10.STOCK OPTIONS
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and, accordingly, recognizes no compensation expense for stock
option grants.
F-17
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma effect on net income and earnings per share for 1995 and 1996
of the fair value method required by Statement No. 123, "Accounting for Stock-
Based Compensation" is immaterial. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted-average assumptions for 1995 and 1996: risk-free
interest rate of 6%; dividend yield of 2.7%; volatility factor of .18; and an
expected life of the option of 10 years.
As of December 31, 1996, the Company's Board of Directors has awarded
options to purchase a total of 802,800 shares of Voting Common Stock to
certain key executives, at various exercise prices. All options granted have
10 year terms and vest and become fully exercisable at the end of three years
of continued employment.
A summary of the Company's stock option activity, and related information
for the years ended December 31, follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------- ---------------------- ----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
(000) EXERCISE PRICE (000) EXERCISE PRICE (000) EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 678 $ 3 639 $ 3 705 $ 4
Granted................. -- -- 113 11 -- --
Exercised............... (38) 2 (47) 1 (54) 2
Forfeited............... (1) 4 -- -- (1) 11
Outstanding at end
of year................ 639 $ 3 705 $ 4 650 $ 4
Exercisable at end
of year................ 545 $ 3 607 $ 3 590 $ 4
Weighted-average fair
value of options
granted during the
year................... -- $2.84 --
</TABLE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$1.11 to $10.56, and the weighted-average remaining contractual life of those
options was 5.1 years.
11. COMMITMENTS AND CONTINGENCIES
Environmental Indemnity and Guarantee
The facilities of the Company are subject to a number of federal, state and
local laws and regulations governing, among other things, the treatment,
storage and disposal of wastes, the discharge of effluent into waterways, the
emission of substances into the air and various health and safety matters.
These laws and regulations are subject to frequent amendment. The Company
expects to incur substantial costs for ongoing compliance with such laws and
regulations. In addition, it is possible that the Company may face third-party
claims for cleanup or for injuries resulting from contamination. Under the
terms of the asset purchase agreement among the management investors, Beazer,
Inc. and Koppers Australia at the formation of the Company in 1988 (the "Asset
Purchase Agreement") Beazer East, Inc. ("Beazer East") assumed the liability
for and indemnified the Company against cleanup liabilities for past
contamination occurring prior to the purchase date at properties acquired from
Beazer East, as well as third-party claims arising from such past
contamination (the "Indemnity"). Beazer Limited unconditionally guaranteed
Beazer East's performance of the indemnity pursuant to a guarantee (the
"Guarantee"). However, if such indemnification was not available for any
reason, including the inability of Beazer East and/or Beazer Limited to make
such indemnification payments, the Company may not have sufficient resources
to meet such liabilities.
F-18
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Beazer East has adhered to the terms of the indemnity agreement and is
actively fulfilling its obligations to conduct investigative and remedial
programs at the properties which the Company acquired from Beazer East in
accordance with the requirements of regulatory authorities. The Indemnity is
not applicable to sites acquired since the formation of the Company, for which
separate indemnifications have been negotiated where appropriate. At the
properties which the Company acquired subsequent to the acquisition of the
Beazer East properties, all remedial actions are being performed in accordance
with applicable regulations and all indemnification obligations are being
honored.
Beazer East and Beazer Limited are indirect subsidiaries of Hanson PLC. The
largest and smallest group in which the results of these companies are
consolidated is that headed by Hanson PLC. Beazer East is an operating company
which had revenues of approximately $600 million for each of the last three
fiscal years ended September 28, 1996 and had total assets of $1.7 billion as
of September 28, 1996. The Beazer East unaudited consolidated balance sheet at
September 28, 1996 reflects negative net worth of $64 million (including an
intercompany liability of $1.4 billion). This negative net worth is in large
measure the result of the adoption of SFAS 121 which resulted in pre-tax
charges for asset write downs of $4.4 billion during fiscal year 1996.
Furthermore, Beazer East had a negative cash flow from operations in the
fiscal year ended September 28, 1996 and required funding from other Hanson
subsidiaries to meet its obligations. According to the Directors' Report and
draft accounts for the year ended September 30, 1996 Beazer Limited is a
holding company. While the balance sheet at September 30, 1996 expects to show
a negative shareholder funds balance of (Pounds)10.4bn, the accounts are
prepared under the going concern concept because a fellow subsidiary
undertaking provides financial support to enable Beazer Limited to meets its
liabilities as they fall due. The Company has been informed that Beazer East
and Beazer Limited will remain wholly-owned indirect subsidiaries of Hanson
PLC. Management believes that Beazer East and Beazer Limited will continue to
fulfill their obligations as they have for the last 8 years.
In the event that Beazer East and Beazer Limited do not continue to fulfill
their commitment under the Indemnity and the Guarantee, the Company may be
required to pay costs covered by the Indemnity. The Company has been informed
by Beazer East that for the last three years amounts paid by Beazer East under
the Indemnity have averaged approximately $13 million per year. The
requirement to pay such costs without reimbursement would have a material
adverse effect on the business, financial condition and results of operations
of the Company. Furthermore, if the Company were required to record a
contingent liability in respect of matters covered by the Indemnity on its
balance sheet the result could be that the Company would have significant
negative net worth.
In addition, Beazer East is presently defending certain toxic tort actions
arising from the pre-Closing operation of assets which the Company acquired
from Beazer East. These tort actions were not assumed by the Company under the
Asset Purchase Agreement and, in any event, are within the scope of the
Indemnity.
Other Environmental Matters
The Jefferson County Department of Health ("Jefferson County") issued a
notice of violation in March 1996 in connection with various alleged
violations of Jefferson County's air pollution control regulations for
emissions from coke oven batteries at the Company's Woodward, Alabama coke
facility (the "Woodward Facility") during the period May 26, 1992 through
March 1, 1996. The Company and Jefferson County are currently negotiating a
settlement agreement, pursuant to which the Company might be required to
install monitoring and control equipment and institute operational changes.
The present draft of the settlement agreement also proposes that the Company
pay a civil penalty in the amount of $300,000, although the Company has not
agreed to such amount. In addition, the Company has decided that it will
permanently shut down Batteries No. 4A and No. 4B and idle one-half of Battery
No. 5 at the Woodward Facility, resulting in a loss of
F-19
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
approximately one-third of the production capacity. Recently, the United
States Environmental Protection Agency ("EPA") sent a notice of violation to
the Company covering the same issues that are being addressed in the
settlement agreement negotiations. There can be no assurance that the
resolution of this matter, including additional actions or penalties that
might be required by the EPA, if any, will not have a material adverse effect
on the business, financial condition and results of operations of the Company.
The Company recently discovered that certain benzene abatement equipment at
the Company's Woodward Facility has not been operational for several months.
Following a preliminary investigation the Company also discovered that certain
reports and records contained incomplete and inaccurate information and that
certain reports and certifications were not filed when required. The Company
has notified Jefferson County, the State of Alabama and the EPA of the
environmental irregularities. Counsel and independent investigators have been
retained to conduct a complete and thorough investigation. While the Company
believes that the costs to repair such equipment will not exceed $300,000, the
Company could be subject to significant liability in connection with these
matters, including fines and civil and criminal penalties and the risk of
third party litigation and there can be no assurances that the resolution of
these matters will not have a material adverse effect on the business,
financial condition and results of operations of the Company.
The Pennsylvania Department of Environmental Protection ("PADEP") recently
issued a notice of violation alleging that the boilers at the Monessen
Facility are emitting greater quantities of nitrogen oxides than allowed under
a plan approved by PADEP. The Company is currently installing additional
equipment, modifying existing equipment and investigating additional methods
to improve boiler performance. If these measures are not successful, the
Company may have to install post-combustion control equipment. Resolution of
the matter could have a negative effect on the business, financial condition
and results of operations of the Company.
Litigation Settlements
The Company settled litigation with CSX Transportation, Inc. ("CSX") related
to a Complaint served by CSX on May 24, 1996 which alleged that the Company
failed to fulfill environmental obligations under two contracts executed by
CSX and the Company's predecessor in 1988 and performed by the Company. The
Complaint also sought reimbursement of any damages incurred in connection with
a 1992 lawsuit filed by Beazer East against CSX in which Beazer East sought
contribution for environmental cleanup at certain facilities including some
presently owned by the Company. The settlement agreement requires the Company
to pay certain amounts in each of the next five years. The Company has
recorded a $2.5 million charge to pretax earnings in the fourth quarter of
1996 as a result of the agreement.
On October 4, 1996 the Company settled litigation with Owens-Corning
Fiberglas Corporation ("OCF") which involved matters which occurred before the
Company came into existence. The case went to trial in early 1996 and, in
April 1996 resulted in a jury verdict against the Company for $10.3 million
plus legal fees and claims for pre-trial and post-trial interest. The Company
entered into a confidential settlement with OCF under which the Company paid
$12.7 million, in settlement of all claims. The charge to earnings for 1996
for the settlement and related legal fees was $10.2 million, as $3 million had
been provided for previously.
Rents
Rent expense for 1994, 1995 and 1996 was $10.3 million, $11.1 million and
$13.5 million, respectively. Commitments during the next five years under
operating leases approximate $14 million per year.
F-20
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. OPERATIONS BY BUSINESS SEGMENT
The Company's operations are carried out in three business segments.
Financial information about each business segment is provided in the following
table:
<TABLE>
<CAPTION>
BUSINESS SEGMENTS
------------------------------
CARBON RAILROAD
MATERIALS & UTILITY COKE
& CHEMICALS PRODUCTS PRODUCTS CORPORATE TOTAL
----------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1994:
Net sales................... $164,489 $239,596 $ 72,363 $ -- $476,448
Operating profit............ 17,019 16,203 2,627 (10,140) 25,709
Identifiable assets......... 90,578 105,594 45,501 52,520 294,193
Depreciation and
amortization................ 6,739 4,989 4,111 841 16,680
Capital expenditures........ 8,729 4,998 2,599 -- 16,326
YEAR ENDED DECEMBER 31,
1995:
Net sales................... $197,434 $248,212 $ 80,084 $ -- $525,730
Operating profit............ 27,358 22,621 33 (10,164) 39,848
Identifiable assets......... 98,334 121,162 70,824 58,635 348,955
Depreciation and
amortization................ 6,694 5,832 4,132 874 17,532
Capital expenditures........ 7,623 16,229 26,289 -- 50,141
YEAR ENDED DECEMBER 31,
1996:
Net sales................... $239,298 $239,913 $109,333 $ -- $588,544
Operating profit............ 24,705 16,685 (3,516) (10,243) 27,631
Identifiable assets......... 150,377 111,804 69,521 79,478 411,180
Depreciation and
amortization................ 8,654 6,362 5,726 1,051 21,793
Capital expenditures........ 48,504 5,209 7,237 284 61,234
</TABLE>
Intersegment sales of $12.8 million, $12.1 million and $13.9 million have
been eliminated in 1994, 1995 and 1996, respectively, from the schedule of
segment information.
Sales to LTV Steel Company, Inc. by the Coke Products business amounted to
10.8% of the Company's total net sales for 1996.
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
------------- ------------- ------------- -------------
1995 1996 1995 1996 1995 1996 1995 1996
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $122.2 $126.7 $135.6 $156.9 $140.9 $159.9 $127.0 $145.0
Operating profit........ $ 9.7 $ 4.2 $ 13.6 $ 13.9 $ 11.0 $ 3.2 $ 5.8 $ 6.3
Net income (loss)....... $ 5.1 $ (7.7) $ 8.7 $ 10.7 $ 6.4 $ 2.5 $ 4.2 $ 8.6
Earnings (loss) per
share of
common stock........... $ 0.50 $(0.78) $ 0.84 $ 1.14 $ 0.62 $ 0.27 $ 0.40 $ 0.91
</TABLE>
F-21
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS
The Company's payment obligations under the 9 7/8% Senior Subordinated Notes
Due 2007 (the "Senior Subordinated Notes") are fully and unconditionally
guaranteed on a joint and several basis by Koppers Industries International
Trade Corporation, Koppers Australia Pty. Ltd., Koppers Industries of
Delaware, Inc. and Koppers Industries B.W., Inc. (collectively, the "Guarantor
Subsidiaries"). The Senior Subordinated Notes have not been guaranteed by KHC
Assurance, Inc., Tarconord A/S, and KSA Limited Partnership (collectively, the
"Non-Guarantor Subsidiaries"). In accordance with previous positions
established by the Securities and Exchange Commission, the following
summarized financial information illustrates separately the composition of the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries. Separate complete
financial statements of the respective Guarantor Subsidiaries, other than
Koppers Australia Pty. Ltd., are not presented because management has
determined that they would not provide additional material information that
would be useful in assessing the financial composition of the guarantors and
non-guarantors. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
SUMMARIZED CONDENSED FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets.......... $169,177 $19,636 $33,947 $(62,494) $160,266
Non-current assets...... 224,800 22,263 34,052 (30,201) 250,914
Current liabilities..... 122,108 7,718 15,246 (62,494) 82,578
Non-current liabilities. 237,272 5 13,262 -- 250,539
Net sales............... 587,861 12,893 3,171 (15,381) 588,544
Gross profit (after
depreciation &
restructuring)......... 44,997 10,681 163 (665) 55,176
Net income (loss) before
extraordinary item..... (1,694) 14,229 2,120 (557) 14,098
Net income (loss)....... (1,694) 14,229 2,120 (557) 14,098
</TABLE>
SUMMARIZED CONDENSED FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets.......... $147,356 $ 4,552 $10,605 $(18,509) $144,004
Non-current assets...... 183,072 15,764 35,044 (28,929) 204,951
Current liabilities..... 76,240 3,001 3,177 (18,509) 63,909
Non-current liabilities. 202,185 5 4,626 -- 206,816
Net sales............... 525,206 523 1,955 (1,954) 525,730
Gross (new) profit
(after depreciation &
restructuring)......... 67,930 (1,393) 915 -- 67,452
Net income (loss) before
extraordinary item..... 14,878 5,503 4,410 (351) 24,440
Net income (loss)....... 14,878 5,503 4,410 (351) 24,440
</TABLE>
F-22
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SUMMARIZED CONDENSED FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............... $475,981 $ 487 $1,907 $(1,927) $476,448
Gross profit (after
depreciation &
restructuring)......... 50,685 (1,213) 305 -- 49,777
Net income (loss) before
extraordinary item..... 7,561 4,265 1,637 (546) 12,917
Net income (loss)....... 5,746 4,265 1,637 (546) 11,102
</TABLE>
F-23
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1996 1997
<S> <C> <C>
Net sales.................................................. $443,510 $452,260
Operating expenses:
Costs of sales........................................... 374,491 380,825
Depreciation and amortization............................ 16,298 17,908
Selling, research, general and administrative............ 21,379 21,559
Restructuring charges.................................... 10,071 --
-------- --------
Total operating expenses............................... 422,239 420,292
-------- --------
Operating profit........................................... 21,271 31,968
Equity in earnings of affiliates........................... 6,427 4,696
Other expense.............................................. (10,123) (1,414)
-------- --------
Income before interest expense and income tax (benefit)
provision ................................................. 17,575 35,250
Interest expense........................................... 12,462 12,387
-------- --------
Income before income tax (benefit) provision .............. 5,113 22,863
Income tax (benefit) provision ............................ (414) 704
-------- --------
Net income................................................. $ 5,527 $ 22,159
-------- --------
Earnings per share of common stock......................... $ 0.57 $ 2.40
======== ========
</TABLE>
See accompanying notes.
F-24
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
* (UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash.............................................. $ 1,526 $ 491
Accounts receivable less allowance for doubtful
accounts of $359 in 1996 and $148 in 1997........ 72,229 75,471
Inventories:
Raw materials................................... 33,635 32,510
Work in process................................. 3,168 2,673
Finished goods.................................. 44,090 42,036
LIFO reserve.................................... (7,971) (10,111)
--------- ---------
Total inventories............................. 72,922 67,108
Other............................................. 13,589 12,833
--------- ---------
Total current assets.......................... 160,266 155,903
Investments......................................... 55,373 49,624
Fixed assets:....................................... 296,688 308,174
Less: accumulated depreciation.................... (123,468) (139,767)
--------- ---------
Net fixed assets................................ 173,220 168,407
Other assets:....................................... 22,321 21,989
--------- ---------
Total assets.................................... $ 411,180 $ 395,923
========= =========
</TABLE>
- --------
* Summarized from the audited fiscal year 1996 balance sheet.
See accompanying notes.
F-25
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS EXCEPT SHARES DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
* (UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 37,255 $ 35,809
Accrued liabilities............................... 38,174 31,507
Current portion of term loans..................... 7,149 8,242
-------- -----------
Total current liabilities....................... 82,578 75,558
Long-term debt:
Revolving credit.................................. 43,000 26,000
Term loans........................................ 49,735 45,530
Senior Notes...................................... 110,000 110,000
-------- -----------
Total long-term debt............................ 202,735 181,530
Other long-term reserves............................ 47,804 47,355
-------- -----------
Total liabilities............................... 333,117 304,443
Common stock subject to redemption.................. 23,957 22,940
Voting Common Stock, $.01 par value:
10,000,000 shares authorized, 6,707,952 shares
issued........................................... 67 67
Non-Voting Common Stock, $.01 par value:
10,000,000 shares authorized, 3,628,200 total
shares issued.................................... 36 36
Capital in excess of par value...................... 11,675 11,675
Retained earnings................................... 45,813 66,230
Cumulative translation adjustment................... 2,181 (3,589)
Treasury stock, at cost, 1,531,511 shares in 1996
and 1,548,335 shares in 1997........................ (5,666) (5,879)
-------- -----------
Total liabilities and stockholders' equity...... $411,180 $ 395,923
======== ===========
</TABLE>
- --------
* Summarized from audited fiscal year 1996 balance sheet.
See accompanying notes.
F-26
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1997
<S> <C> <C>
Cash provided by operating activities..................... $ 31,688 $ 35,563
Cash used in investing activities:
Acquisitions and related capital expenditures........... (39,331) --
Capital expenditures.................................... (16,134) (12,999)
Other................................................... 312 623
--------- ---------
Net cash used in investing activities................. (55,153) (12,376)
Cash provided by (used in) financing activities:
Borrowings from revolving credit........................ 124,750 101,500
Repayments of revolving credit.......................... (109,250) (118,500)
Repayment of long-term debt............................. (12,030) (3,111)
Proceeds from long-term debt............................ 35,950 --
Payment of deferred financing costs..................... (1,081) (486)
Purchase of voting common stock......................... (1,811) (1,381)
Purchase of non-voting common stock..................... (12,250) --
Dividends on common stock............................... (2,336) (2,244)
--------- ---------
Net cash provided by (used in) financing activities... 21,942 (24,222)
--------- ---------
Net decrease in cash...................................... (1,523) (1,035)
Cash at beginning of period............................... 1,618 1,526
--------- ---------
Cash at end of period..................................... $ 95 $ 491
========= =========
</TABLE>
See accompanying notes.
F-27
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") which is contained in this Prospectus
contains additional information on the results of operations and the
financial position of the Company. Those comments should be read in
conjunction with these notes. The Company's audited financial statements
for the years ended December 31, 1994, 1995, and 1996 include additional
information about the Company, its operations, and its financial position,
and should be read in conjunction with this quarterly financial
information.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full fiscal year.
(3) In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
(4) On October 15, 1997 certain members of the group of management investors
of the Company (the "Management Investors"), along with KAP Investments,
Inc., ("KAP") a wholly-owned subsidiary of Koppers Australia Pty. Limited,
the Company's 50% joint venture in Australia ("Koppers Australia")
purchased 2,117,952 shares of voting Common Stock and 1,815,000 shares of
non-voting common stock from Cornerstone-Spectrum, Inc. ("Cornerstone")
for $52.5 million. The purchase of shares was an exercise of a right of
first refusal granted to existing shareholders in the Company's
stockholders' agreement which was part of the formation of the Company in
1988 (the "Stockholders' Agreement"). As a result of the sale of shares by
Cornerstone, and in accordance with the terms of the Stockholder'
Agreement, the Cornerstone director, Brian C. Beazer, tendered his
resignation from the Board of Directors of the Company. The Management
Investors and Koppers Australia intend to use the shares to repay certain
loans obtained to finance the transaction.
(5) On October 8, 1997 the Company announced that it had entered into a
definitive agreement with the Broken Hill Proprietary Company Limited
located in Melbourne, Australia ("Broken Hill") to acquire its 50%
interest in Koppers Australia, which will result in Koppers Australia
being a wholly-owned subsidiary of the Company. The purchase, with an
estimated purchase price of $65 million, is expected to be completed in
the fourth quarter of 1997.
(6) The Company has issued a cash tender offer and consent solicitation
relating to all of the Company's $110 million 8 1/2% Senior Notes due 2004
(the "Notes"). The tender offer is part of the Company's overall plan of
recapitalization (the "Recapitalization"). At the expiration of the tender
offer the remaining steps of the Recapitalization will be completed,
including: (i) the acquisition by the Company of the 50% of Koppers
Australia not owned by it; (ii) the repayment in full of the Company's
existing bank credit facilities; and (iii) the redemption by the Company
of a portion of the shares of Common Stock held by certain existing
investors, including a portion of such shares held by the Management
Investors. Financing for the Recapitalization will be provided by a new
senior credit facility and by a contemporaneous offering of senior
subordinated notes of the Company pursuant to Rule 144A.
(7) The Company's payment obligations under the 9 7/8% Senior Subordinated
Notes Due 2007 (Senior Subordinated Notes) are fully and unconditionally
guaranteed on a joint and several basis by Koppers Industries
International Trade Corporation, Koppers Australia Pty. Ltd., Koppers
Industries of Delaware, Inc. and Koppers Industries B.W., Inc.
(collectively, the "Guarantor Subsidiaries"). The Senior Subordinated
Notes have not been guaranteed by KHC Assurance, Inc., Tarconord A/S, and
KSA Limited Partnership (collectively, the "Non-Guarantor Subsidiaries").
In accordance with previous positions established by the Securities and
Exchange Commission, the following summarized financial information
illustrates separately the composition of the Guarantor Subsidiaries and
the Non-Guarantor Subsidiaries. Separate complete financial statements of
the respective Guarantor Subsidiaries, other than Koppers
F-28
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Australia Pty. Ltd., are not presented because management has determined
that they would not provide additional material information that would be
useful in assessing the financial composition of the guarantors and non-
guarantors. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
SUMMARIZED CONDENSED FINANCIAL INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets.......... $164,373 $30,576 $36,377 $(75,423) $155,903
Non-current assets...... 219,659 18,344 31,931 (29,914) 240,020
Current liabilities..... 129,608 6,640 14,733 (75,423) 75,558
Non-current liabilities. 215,248 6 13,631 -- 228,885
Net sales............... 452,051 9,793 5,348 (14,932) 452,260
Gross profit (after
depreciation).......... 44,784 9,548 42 (847) 53,527
Net income (loss) before
extraordinary item..... 7,397 12,457 2,738 (433) 22,159
Net income (loss)....... 7,397 12,457 2,738 (433) 22,159
</TABLE>
F-29
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of KOPPERS AUSTRALIA PTY. LIMITED
We audited the accompanying consolidated balance sheets of Koppers Australia
Pty. Limited as of June 30, 1996 and June 30, 1997, and the related
consolidated statements of profit and loss and cash flows for the two years
ended June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. 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 consolidated financial position
of Koppers Australia Pty. Limited at June 30, 1996 and 1997 and the
consolidated results of their operations and their cash flows for the years
ended June 30, 1996 and 1997 in conformity with generally accepted accounting
principles in the United States.
As discussed in Note 1 to the financial statements, in fiscal 1997, the
Company changed its method of accounting for investments in associates.
/s/ Ernst & Young
Sydney, Australia
August 25, 1997
F-30
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEARS ENDED 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
OPERATING REVENUE....................................... 2 173,783 171,460
======= =======
OPERATING PROFIT BEFORE ABNORMAL ITEMS AND INCOME TAX... 2 29,194 29,977
ABNORMAL ITEMS BEFORE INCOME TAX........................ 3 -- (1,663)
------- -------
OPERATING PROFIT BEFORE INCOME TAX...................... 2 29,194 28,314
INCOME TAX ATTRIBUTABLE TO OPERATING PROFIT............. 4 10,397 9,376
------- -------
OPERATING PROFIT AFTER INCOME TAX....................... 18,797 18,938
OUTSIDE EQUITY INTERESTS IN OPERATING PROFIT AFTER
INCOME TAX............................................. 24 2,750 1,877
------- -------
OPERATING PROFIT AFTER INCOME TAX
Attributable to members of Koppers Australia Pty.
Limited.............................................. 5 16,047 17,061
RETAINED PROFITS
At the beginning of the financial year................ 64,995 72,042
Adjustments Resulting from Adoption of New Accounting
Standard............................................. -- 8,970
------- -------
TOTAL AVAILABLE FOR APPROPRIATION....................... 81,042 98,073
DIVIDENDS PAID.......................................... 5 9,000 6,501
------- -------
RETAINED PROFITS
At the end of the financial year...................... 72,042 91,572
======= =======
</TABLE>
The Profit and Loss Account should be read in conjunction with the accompanying
notes.
F-31
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
CURRENT ASSETS
Cash.................................................... 1,805 6,379
Receivables............................................. 7 23,566 25,737
Inventories............................................. 8 33,809 37,494
Other................................................... 9 1,680 989
------- -------
TOTAL CURRENT ASSETS.................................. 60,860 70,599
------- -------
NON-CURRENT ASSETS
Receivables............................................. 10 6,355 6,355
Inventories............................................. 11 1,765 1,765
Investments............................................. 12 5,349 20,623
Property, plant and equipment........................... 13 67,210 65,009
Intangibles............................................. 14 1,332 1,229
Other................................................... 15 1,717 2,876
------- -------
TOTAL NON-CURRENT ASSETS.............................. 83,728 97,857
------- -------
TOTAL ASSETS.......................................... 144,588 168,456
------- -------
CURRENT LIABILITIES
Accounts payable........................................ 16 12,041 12,178
Borrowings.............................................. 17 1,573 3,526
Provisions.............................................. 18 15,332 13,536
------- -------
TOTAL CURRENT LIABILITIES............................. 28,946 29,240
------- -------
NON-CURRENT LIABILITIES
Accounts payable........................................ 19 -- 22
Borrowings.............................................. 20 11,302 11,500
Provisions.............................................. 21 5,079 5,767
------- -------
TOTAL NON-CURRENT LIABILITIES......................... 16,381 17,289
------- -------
TOTAL LIABILITIES..................................... 45,327 46,529
------- -------
NET ASSETS................................................ 99,261 121,927
======= =======
SHAREHOLDERS' EQUITY
Share capital........................................... 22 14,559 14,559
Reserves................................................ 23 4,487 7,005
Retained profits........................................ 72,042 91,572
------- -------
Total parent entity interest in equity.................. 91,088 113,136
Outside equity interest
Issued capital........................................ 2,940 2,940
Reserves.............................................. 230 467
Retained profits...................................... 5,003 5,384
------- -------
Total outside equity interest........................... 24 8,173 8,791
------- -------
TOTAL SHAREHOLDERS' EQUITY............................ 99,261 121,927
======= =======
</TABLE>
The Balance Sheet should be read in conjunction with the accompanying notes.
F-32
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers............................ 172,722 162,998
Payments to suppliers and employees................ (131,431) (129,110)
Interest received.................................. 305 428
Interest and other costs of finance paid........... (1,941) (1,185)
Income tax paid.................................... (9,704) (17,012)
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES............. 25 29,951 16,119
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of shares in controlled entity............ (7,046) --
Acquisition of property, plant and equipment....... (7,961) (9,165)
Proceeds from sale of property, plant and
equipment......................................... 531 715
Dividends received................................. 986 981
Cash paid for investment in partnership............ (2,073) --
-------- --------
NET CASH FLOWS FROM INVESTING ACTIVITIES............. (15,563) (7,469)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid..................................... (9,000) (6,501)
Dividends paid to outside equity interests......... (2,790) (1,496)
Borrowing repayments............................... (2,025) --
Proceeds from borrowings........................... -- 2,989
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES............. (13,815) (5,008)
-------- --------
NET INCREASE/(DECREASE) IN CASH HELD................. 573 3,642
Add opening cash brought forward................... 3,626 3,950
Effects of exchange rate changes on foreign
currencies
at beginning of the financial year................ (249) 143
-------- --------
CLOSING CASH CARRIED FORWARD......................... 25 3,950 7,735
======== ========
</TABLE>
The Statement of Cash Flows should be read in conjunction with the accompanying
notes.
F-33
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
PROFIT AND LOSS ACCOUNT
YEARS ENDED 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
OPERATING REVENUE.......................................... 2 13,695 8,876
====== ======
OPERATING PROFIT........................................... 2 11,168 6,938
INCOME TAX ATTRIBUTABLE TO OPERATING PROFIT................ 4 (95) 175
------ ------
OPERATING PROFIT AFTER INCOME TAX.......................... 11,263 6,763
RETAINED PROFITS
At the beginning of the financial year................... 11,707 13,970
------ ------
TOTAL AVAILABLE FOR APPROPRIATION.......................... 22,970 20,733
DIVIDENDS PAID............................................. 6 9,000 6,501
------ ------
RETAINED PROFITS
At the end of the financial year......................... 13,970 14,232
====== ======
</TABLE>
The Profit and Loss Account should be read in conjunction with the accompanying
notes.
F-34
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
BALANCE SHEET
AT 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
CURRENT ASSETS
Cash...................................................... 10 --
Receivables............................................... 7 248 956
Other..................................................... 9 3 46
------ ------
TOTAL CURRENT ASSETS.................................... 261 1,002
------ ------
NON-CURRENT ASSETS
Investments............................................... 12 45,692 45,692
Property, plant and equipment............................. 13 114 120
Other..................................................... 15 217 306
------ ------
TOTAL NON-CURRENT ASSETS................................ 46,023 46,118
------ ------
TOTAL ASSETS............................................ 46,284 47,120
------ ------
CURRENT LIABILITIES
Accounts payable.......................................... 16 160 285
Borrowings................................................ 17 2,286 1,369
Provisions................................................ 18 477 487
------ ------
TOTAL CURRENT LIABILITIES............................... 2,923 2,141
------ ------
NON-CURRENT LIABILITIES
Borrowings................................................ 20 -- 1,500
Provisions................................................ 21 474 330
------ ------
TOTAL NON-CURRENT LIABILITIES........................... 474 1,830
------ ------
TOTAL LIABILITIES....................................... 3,397 3,971
------ ------
NET ASSETS.................................................. 42,887 43,149
====== ======
SHAREHOLDERS' EQUITY
Share capital............................................. 22 14,559 14,559
Reserves.................................................. 23 14,358 14,358
Retained profits.......................................... 13,970 14,232
------ ------
TOTAL SHAREHOLDERS' EQUITY.............................. 42,887 43,149
====== ======
</TABLE>
The Balance Sheet should be read in conjunction with the accompanying notes.
F-35
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
STATEMENT OF CASH FLOWS
YEARS ENDED 30 JUNE 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
NOTES A$'000 A$'000
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Interest received....................................... 8 154
Receipts from customers................................. 2,630 2,126
Dividends received...................................... 11,710 6,542
Payments to suppliers and employees..................... (1,816) (1,749)
Income tax paid......................................... (260) (164)
Interest and other costs of finance paid................ (42) (245)
------ ------
NET CASH FLOWS FROM OPERATING ACTIVITIES.................. 25 12,230 6,664
------ ------
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment..... -- 54
Acquisition of property, plant and equipment............ (14) (92)
Purchase of shares...................................... (7,046) --
------ ------
NET CASH FLOWS USED IN INVESTING ACTIVITIES............... (7,060) (38)
------ ------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings--other....................................... -- 1,500
Borrowings--related parties............................. 2,900 (1,704)
Dividends paid.......................................... (9,000) (6,501)
------ ------
NET CASH FLOWS USED IN FINANCING ACTIVITIES............... (6,100) (6,705)
------ ------
NET INCREASE/(DECREASE) IN CASH HELD...................... (930) (79)
Add opening cash brought forward........................ 940 10
------ ------
CLOSING CASH CARRIED FORWARD.............................. 25 10 (69)
====== ======
</TABLE>
The Statement of Cash Flows should be read in conjunction with the accompanying
notes.
F-36
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
30 JUNE 1996 AND 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of accounting
The financial statements are general purpose financial statements which have
been made out in accordance with the requirements of the Corporations Law
which include disclosures required by Schedule 5 and applicable Accounting
Standards and other mandatory professional reporting requirements (Urgent
Issues Group Consensus Views).
The accounting policies adopted are consistent with those of the previous
year except as outlined below.
In accordance with ASC Class Order 97/0798, the directors have elected to
adopt the provisions of Proposed Revised Accounting Standard AASB1016
Accounting for Investments in Associates. The effect is that investments in
associates are brought to account using the equity method of accounting under
which the carrying amount of the investment is increased or decreased to
recognise the investor's share of the post-acquisition profits or losses and
other changes in net assets of the associate. The investor's share of the
post-acquisition profits or losses of the associate is included in the
consolidated profit or loss account of the investor.
Investments in associates were previously brought to account at cost. (Refer
Note 12)
b) Foreign currencies
Translation of foreign currency transactions
Transactions in foreign currencies of entities within the economic entity
are converted to local currency at the rate of exchange ruling at the date of
the transaction.
Amounts payable to and by the entities within the economic entity that are
outstanding at the balance date and are denominated in foreign currencies have
been converted to local currency using rates of exchange ruling at the end of
the financial year.
Except for certain specific hedges and hedges of foreign currency
operations, all resulting exchange differences arising on settlement or
restatement are brought to account in determining the profit or loss for the
financial year, and transaction costs, premiums and discounts on forward
currency contracts are deferred and amortized over the life of the contract.
Specific hedges
Where a purchase or sale is specifically hedged, exchange gains or losses on
the hedging transaction arising up to the date of purchase or sale and costs,
premiums and discounts relative to the hedging transaction are included with
the purchase or sale. Exchange gains and losses arising on the hedge
transaction after that date are taken to the profit and loss account.
Hedges of foreign operations
Exchange gains and losses on transactions hedging investments in foreign
operations are taken to the foreign currency translation reserve on
consolidation.
Translation of accounts of overseas operations
All overseas operations are deemed self-sustaining as each is financially
and operationally independent of Koppers Australia Pty. Limited. The accounts
of overseas operations are translated using the current rate method and any
exchange differences are taken directly to the foreign currency translation
reserve.
c) Cash
For the purposes of the statement of cash flows, cash includes cash on hand
and in banks, and money market investments readily convertible to cash within
two working days, net of outstanding bank overdrafts.
F-37
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
d) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and
condition are accounted for as follows:
* Raw materials--purchase cost on a first-in-first-out basis; and
* Finished goods and work-in-progress--cost of direct material and labour
and a proportion of manufacturing overheads based on operating capacity.
e) Recoverable amount
Non-current assets are not revalued to an amount above their recoverable
amount, and where carrying values exceed this recoverable amount assets are
written down. In determining recoverable amount the expected net cash flows
have not been discounted to their present value.
f) Property, plant and equipment
Cost and valuation
Items of property, plant and equipment comprising a class of non-current
assets are revalued at the same date on a consistent basis. Assets under
construction are brought to account at cost.
Where assets have been revalued, the potential effect of the capital gains
tax on disposal has not been taken into account in the determination of the
revalued carrying amount.
Depreciation
Depreciation is provided on a straight line basis on all property, plant and
equipment, other than freehold land.
Major depreciation periods are:
<TABLE>
<S> <C> <C>
Plant and equipment -- 5 to 15 years
Buildings on freehold land -- 20 years
Leasehold improvements -- the lease term or the estimated
useful life of the improvement,
whichever is shorter.
</TABLE>
g) Intangibles
Goodwill
Goodwill is amortised by the straight line method over the period during
which benefits are expected to be received. This is taken as being 20 years.
h) Other non-current assets
Expenditure carried forward
Significant items of carry forward expenditure having a benefit or
relationship to more than one period are written off over the periods to which
such expenditure relates.
F-38
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
i) Employee entitlements
A number of companies in the economic entity offer an employee incentive
scheme to full time permanent employees. Benefits based on growth in earnings,
are payable after a qualifying period of six years service and three years
membership in the plan. Provision for these employee entitlements, based on
the estimated amount payable to employees is charged to the profits annually.
A trust has been established which offers benefits based on growth in
earnings to full time permanent staff. Benefits are payable after three years
membership in the plan. Provision for these employee entitlements, based on
the estimated amount payable to employees, is charged to the profits annually.
Employee-contributory superannuation funds exist to provide benefits for the
economic entity's employees and their dependents on retirement, disability or
death. The contributions made to these funds by entities within the economic
entity are charged against profits.
In respect of the economic entity's defined benefits superannuation plans,
any contributions made to the superannuation funds by entities within the
economic entity are charged against profits when due.
2. OPERATING REVENUE & OPERATING PROFIT
<TABLE>
<CAPTION>
KOPPERS
AUSTRALIA
CONSOLIDATED PTY. LIMITED
---------------- --------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Included in the operating profit are the
following items of operating revenue:
Sales revenue................................ 171,343 164,864 -- --
Equity income from associate company......... -- 4,505 -- --
Other revenue................................ 618 324 1,989 2,126
Dividends--
Associated companies....................... 986 -- 11,696 6,542
Partnership income........................... -- 624 -- --
Interest--
Related bodies corporate................... -- -- 2 106
Other persons/Corporations................. 305 428 8 48
------- ------- ------ -----
173,252 170,745 13,695 8,822
Proceeds on sale of non-current assets....... 531 715 -- 54
------- ------- ------ -----
Operating revenue............................ 173,783 171,460 13,695 8,876
======= ======= ====== =====
The operating profit before income tax is
arrived at after charging/(crediting) the
following items:
Amortisation of goodwill..................... 144 146 -- --
Amortisation and depreciation of property,
plant and equipment......................... 10,500 10,689 44 40
Diminution in value of inventories........... 345 57 -- --
Bad and doubtful debts--Trade debtors
Other persons/bodies corporate............ 189 315 -- --
Interest expense--
Related parties............................ -- -- 1 110
Other persons/Corporations................. 1,500 1,180 41 135
Finance charges--
Lease liability........................... 2 5 -- --
Rental--operating lease...................... 439 554 -- 113
Profit/Loss on sale of non-current assets.... 46 (38) -- (8)
Net foreign currency (gains)/losses.......... (76) (707) (8) (89)
Provisions for employee entitlements......... 3,786 3,325 559 235
Superannuation contributions................. 1,010 1,184 29 35
Loss on write-off of investment.............. 50 -- 50 --
</TABLE>
F-39
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
3. ABNORMAL ITEMS
<TABLE>
<CAPTION>
KOPPERS
AUSTRALIA
CONSOLIDATED PTY. LIMITED
------------- -------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Included in the operating profit are the following
abnormal items:
Items charged
Unscheduled dry-docking for ballast tank repair
(Applicable income tax $716)................... -- 1,990 -- --
Items credited
Pole provision write-back (Applicable income tax
$118).......................................... -- 327 -- --
------ ----- ----- ------
-- 1,663 -- --
====== ===== ===== ======
</TABLE>
4. INCOME TAX
<TABLE>
<S> <C> <C> <C> <C>
The prima facie tax,* using tax rates applicable
in the country of operation, on operating
profit differs from the income tax provided in
the accounts as follows:
Prima facie tax on operating profit............. 10,322 9,817 4,020 2,505
Tax effect of permanent differences--
Rebatable dividends........................... -- -- (4,210) (2,344)
Other items (net)............................. 28 (727) 102 (2)
Future income tax benefit not brought to
account........................................ 76 14 -- --
Under/(over) provision of previous year......... (26) 272 (7) 16
Prior year losses recouped...................... (3) -- -- --
------ ----- ------ ------
Income tax attributable to operating profit..... 10,397 9,376 (95) 175
====== ===== ====== ======
Future income tax benefit arising from tax
losses of a controlled entity not brought to
account at balance date as realisation of the
benefit is not regarded as virtually certain.
189 176 -- --
====== ===== ====== ======
This future income tax benefit will only be
obtained if:
a) future assessable income is derived of a
nature and of an amount sufficient to
enable the benefit to be realised;
b) the conditions for deductibility imposed by
tax legislation continue to be complied
with; and
c) no changes in tax legislation adversely
affect the economic entity in realising the
benefit.
</TABLE>
- --------
* The prima facie tax has been arrived at using tax rates applicable in the
country of operation.
F-40
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
5. CONTRIBUTIONS TO PROFIT
<TABLE>
<CAPTION>
KOPPERS
AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- -------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Profit contribution from companies within the
economic entity.............................. 16,047 12,556 -- --
Equity income from associate company--Koppers
Industries, Inc.............................. -- 4,505 -- --
------ ------ ----- -----
16,047 17,061 -- --
====== ====== ===== =====
6. DIVIDENDS PAID OR PROVIDED
Dividends paid during the year
Franked dividends............................. 9,000 6,501 9,000 6,501
Unfranked dividends........................... -- -- -- --
------ ------ ----- -----
9,000 6,501 9,000 6,501
====== ====== ===== =====
7. RECEIVABLES (CURRENT)
Trade debtors................................... 21,306 24,715 -- --
Provision for doubtful debts receivable......... (386) (591) -- --
------ ------ ----- -----
20,920 24,124 -- --
Short-term deposits............................. 2,543 1,581 -- --
Other........................................... 75 31 10 --
Amounts other than trade debts receivable
Controlled entity............................. -- -- 237 955
Associated entities........................... 28 1 1 1
------ ------ ----- -----
23,566 25,737 248 956
====== ====== ===== =====
(a) Aggregate amounts receivable from related
parties
Wholly-owned group............................ -- -- 237 307
Other related parties......................... 28 1 1 649
------ ------ ----- -----
28 1 238 956
====== ====== ===== =====
(b) Movement in provision for doubtful debts
Balance at beginning of year.................. 386 --
Exchange movement............................. (16) --
Bad debts previously provided for written-off
during the year.............................. (94) --
Bad and doubtful debts provided for during the
year......................................... 315 --
------ -----
Balance at end of year.......................... 591 --
====== =====
Comparatives not included as this disclosure was
not required prior to June 1997
(c) Australian dollar equivalent of amounts
receivable in foreign currencies not
effectively hedged:
--United States dollars...................... 917 4,001 -- --
--United Kingdom pounds...................... 299 115 -- --
--Singapore dollars.......................... 103 75 -- --
------ ------ ----- -----
1,319 4,191 -- --
====== ====== ===== =====
</TABLE>
F-41
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
8. INVENTORIES (CURRENT)
<TABLE>
<CAPTION>
KOPPERS
AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- -------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Raw materials and stores......................... 8,111 11,555 -- --
Work in progress................................. 51 360 -- --
Finished goods................................... 26,523 26,131 -- --
Provision for diminution in value................ (876) (552) -- --
------ ------ ------ ------
Total inventories at lower of cost and net
realisable value................................ 33,809 37,494 -- --
====== ====== ====== ======
9. OTHER CURRENT ASSETS
Prepayments...................................... 1,560 706 3 39
Other............................................ 120 283 -- 7
------ ------ ------ ------
1,680 989 3 46
====== ====== ====== ======
10. RECEIVABLES (NON-CURRENT)
Loans and advances
Other.......................................... 6,355 6,355 -- --
------ ------ ------ ------
6,355 6,355 -- --
====== ====== ====== ======
11. INVENTORIES (NON-CURRENT)
Finished goods................................... 1,765 1,765 -- --
------ ------ ------ ------
Total inventories at lower of cost and net
realisable value................................ 1,765 1,765 -- --
====== ====== ====== ======
12. INVESTMENTS (NON-CURRENT)
Investments at cost compromise:
Unlisted controlled entities..................... -- -- 45,692 45,692
Unlisted associated entities..................... 5,349 2,843 -- --
Equity accounted investments..................... -- 17,780 -- --
------ ------ ------ ------
5,349 20,623 45,692 45,692
====== ====== ====== ======
</TABLE>
Included in investments at cost is an investment of A$3 in respect of 60% of
the issued capital of Koppers SEUT Pty. Limited. As this company acts solely
as the trustee for the Koppers Senior Executive Unit Trust, it is not
controlled by Koppers Australia Pty. Limited and has not been consolidated.
F-42
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
Investment in unlisted controlled entities comprises:
<TABLE>
<CAPTION>
BENEFICIAL INVESTMENT
COUNTRY OF PERCENTAGE HELD KOPPERS AUSTRALIA
NAME INCORPORATION BY ECONOMIC ENTITY PTY. LIMITED
- ---- ------------- ------------------ -----------------
1996 1997 1996 1997
% % A$'000 A$'000
<S> <C> <C> <C> <C> <C> <C>
Koppers Investments
(Aust.) Pty Ltd........ (ii) Australia 100 100 6,355 6,355
Koppers-Hickson Invest-
ments Pty. Limited..... Australia 51 51 3,060 3,060
Koppers Power Poles
(Australia) Pty. Limit-
ed..................... (ii) Australia 100 100 955 955
Continental Carbon Aus-
tralia Pty. Limited.... (ii) Australia 100 100 8,572 8,572
KAP Investments Inc..... U.S.A. 100 100 10,846 10,846
Koppers Timber Preserva-
tion Pty. Ltd.......... (ii) Australia 100 100 6,899 6,899
Koppers Coal Tar Prod-
ucts Pty. Ltd.......... (ii) Australia 100 100 9,005 9,005
Koppers Shipping Pty.
Ltd.................... (ii) Australia 100 100 -- --
Koppers-Hickson Timber
Protection Pty.
Limited................ Australia 51 51 -- --
Koppers-Hickson (PNG)
Pty Limited............ (i) P.N.G. 51 51 -- --
Koppers-Hickson Timber
Protection (NZ) Limit-
ed..................... (i) New Zealand 51 51 -- --
Koppers-Hickson Timber
Protection (Fiji) Lim-
ited................... (i) Fiji 51 51 -- --
Koppers-Hickson Timber
Protection (Malaysia)
SDN BHD................ (i) Malaysia 51 51 -- --
Koppers-Hickson Timber
Protection (S) Pte Ltd. (i) Singapore 51 51 -- --
Koppers-Hickson Interna-
tional Pty Ltd......... (i) Australia 51 51 -- --
Koppers-Hickson (SA)
(Pty) Ltd.............. (i) South Africa 51 51 -- --
-------- --------
45,692 45,692
======== ========
</TABLE>
Overseas controlled entities carry on business in the country of
incorporation.
(i) Controlled entities which are audited by other member firms of Ernst &
Young International.
(ii) Pursuant to Class Order 95/1530, relief has been granted to this
controlled entity of Koppers Australia Pty. Limited from the Corporations
Law requirements for preparation, audit and publication of accounts.
As a condition of the Class Order, Koppers Australia Pty. Limited and the
controlled entities subject to the Class Order, have entered into a deed of
indemnity on 18 May 1995. Continental Carbon Australia Pty Ltd was joined
to this deed of cross guarantee by a deed of assumption executed on 20 May
1996. The effect of the deed is that Koppers Australia Pty. Limited has
guaranteed to pay any deficiency in the event of winding up of the
controlled entity. The controlled entities have also given a similar
guarantee in the event that Koppers Australia Pty. Limited is wound up. The
aggregate assets and liabilities of the companies subject to the deed, and
the aggregate result of these companies are as follows:
<TABLE>
<CAPTION>
1996 1997
A$'000 A$'000
<S> <C> <C>
Total assets.................................................. 100,945 123,488
Total liabilities............................................. 33,867 33,858
------- -------
Net assets.................................................... 67,078 89,630
======= =======
Profit after income tax....................................... 15,145 8,986
======= =======
</TABLE>
F-43
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
Investment in unlisted associated entities comprises:
<TABLE>
<CAPTION>
ECONOMIC ENTITY % HELD BY DIVIDEND
INTEREST ECONOMIC ENTITY REVENUE
---------------- --------------- -------------
1996 1997 1996 1997 1996 1997
A$'000 A$'000 % % A$'000 A$'000
<S> <C> <C> <C> <C> <C> <C>
(i)Koppers-Coastchem............ 2,170 2,843 25.5 25.5 N/A N/A
(ii)Koppers Industries, Inc.*... 3,179 -- 22.4 -- 986 --
------- -------
5,349 2,843
======= =======
</TABLE>
- ---------------------
* The investment in Koppers Industries, Inc. was previously brought to
account at cost, but is now brought to account using the equity method of
accounting. This represents a change in accounting policy as outlined in
note 1. (Accordingly comparatives have not been included in the following
disclosures).
Koppers-Coastchem
The interest in the partnership is carried at cost, plus the economic
entity's share of the partnership's result for the year. The economic
entity's share in the partnership's result is included in the economic
entity's profit.
F-44
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
1997
A$'000
<S> <C>
Equity accounted investments comprise:
Carrying value of investment in Koppers Industries, Inc.
Balance at the beginning of the financial year--at cost............ 3,179
Equity cross-holding adjustment.................................... (356)
Initial application of equity accounting...........................
--retained profits............................................... 8,970
--reserves....................................................... 2,095
Share of operating profit after tax................................ 4,505
Dividends received................................................. (981)
Share of movement in reserves...................................... (641)
Foreign exchange variation......................................... 1,009
------
Balance at the end of the financial year............................. 17,780
======
Represented by:
Investment at cost................................................. 2,966
Share of retained profits.......................................... 13,360
Share of reserves.................................................. 1,454
------
17,780
======
Koppers Australia Pty. Limited retained profits attributable to
Koppers Industries, Inc.:
Balance at the beginning of the financial year..................... 8,970
Share of operating profit and extraordinary items after income tax
expense........................................................... 3,035
Share of income tax expense........................................ 1,470
Dividends received from Koppers Industries, Inc.................... (981)
Foreign exchange variation......................................... 866
------
Balance at the end of the financial year............................. 13,360
======
Koppers Australia Pty. Limited reserves attributable to Koppers
Industries, Inc.:
Balance at the beginning of the financial year..................... 2,095
Share of movements during the financial year....................... (719)
Foreign exchange variation........................................... 78
------
Balance at the end of the financial year............................. 1,454
======
</TABLE>
The balance date of Koppers Industries, Inc. is 31 December
<TABLE>
<CAPTION>
30 JUNE 1997 31 DECEMBER 1996
------------ ----------------
<S> <C> <C>
Ownership interest.......................... 22.65% 22.65%
Voting power................................ 35.65% 35.71%
</TABLE>
The issued capital of Koppers Industries, Inc. includes redeemable shares
issued to management investors. In addition, options to acquire shares have
also been issued to the management of Koppers Industries, Inc. Accordingly,
the percentages shown above may be subject to variations in the future through
redemptions of shares or exercise of options. The maximum dilution through
exercise of options as at 30 June 1997 is less than 2%.
Koppers Industries, Inc. holds 100.0% of the issued capital of Koppers
Australia Pty. Limited.
Principal activities of Koppers Industries, Inc. are:
. Producer of Tar Products
carbon pitch; creosote; phthalic anhydride (PAA); roofing
pitch/bitumen
F-45
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
. Producer of Wood Products
treats railroad crossties, poles and pilings for various uses
. Producer of Coke Products
foundry & furnace coke and marketable by-products including coal
tars, gases, oils and chemicals
No adjustment has been made to reflect the dissimilar accounting policy
adopted by the associate company in relation to valuation of inventory. In
particular the last-in-first-out method of inventory valuation has been
adopted by Koppers Industries, Inc.
Koppers Australia Pty. Limited paid dividends to Koppers Industries, Inc.
during the year totalling A$3,250,294 (1996 A$4,499,900) during the year.
13. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
---------------- --------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Freehold land:
At cost............................... 334 1,239 -- --
At directors' valuation 1 July 1983... 1,247 1,245 -- --
------- ------- -------- --------
1,581 2,484 -- --
------- ------- -------- --------
Buildings on freehold land:
At cost............................... 5,819 6,047 -- --
Provision for depreciation............ (1,145) (1,194) -- --
------- ------- -------- --------
4,674 4,853 -- --
------- ------- -------- --------
At directors' valuation 1 July 1983... 2,671 2,671 -- --
Provision for depreciation............ (1,703) (1,853) -- --
------- ------- -------- --------
968 818 -- --
------- ------- -------- --------
Leasehold improvements:
At cost............................... 2,337 2,568 -- --
Provision for amortisation............ (564) (966) -- --
------- ------- -------- --------
1,773 1,602 -- --
------- ------- -------- --------
Total land and buildings.............. 8,996 9,757 -- --
------- ------- -------- --------
Plant and equipment:
At cost............................... 89,931 95,125 188 175
At directors' valuation 1 July 1983... 14,779 14,779 -- --
Provision for depreciation............ (48,299) (56,302) (74) (55)
------- ------- -------- --------
55,871 53,602 114 120
------- ------- -------- --------
Assets under construction............. 2,343 1,650 -- --
------- ------- -------- --------
Total property, plant and equipment... 67,210 65,009 114 120
======= ======= ======== ========
</TABLE>
Valuations
All valuations are estimates of the amounts for which the assets could be
exchanged between a knowledgeable willing buyer and a knowledgeable willing
seller in an arm's length transaction at the valuation date. The economic
entity does not have a set policy for regular revaluation of freehold land and
buildings.
F-46
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
14. INTANGIBLES
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- -------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Goodwill.................................. 2,265 2,175 -- --
Provision for amortisation................ (933) (946) -- --
------ ------ -------- --------
1,332 1,229 -- --
====== ====== ======== ========
15. OTHER NON-CURRENT ASSETS
Future income tax benefits................ 1,717 2,876 217 306
------ ------ -------- --------
16. ACCOUNTS PAYABLE (CURRENT)
Trade creditors........................... 6,432 7,833 22 84
Lease liabilities......................... -- 46 -- --
Amounts other than trade debts payable:
Accrued expenses........................ 4,715 3,611 138 201
Other................................... 894 688 -- --
------ ------ -------- --------
12,041 12,178 160 285
====== ====== ======== ========
Australian dollar equivalents of amounts
payable in foreign currencies not
effectively hedged:
--United States dollars................. 697 385 -- --
--United Kingdom pounds................. 249 95 -- --
--Singapore dollars..................... 1 1 -- --
--New Zealand dollars................... 11 124 -- --
--Australian dollars.................... 108 17 -- --
------ ------ -------- --------
1,066 622 -- --
====== ====== ======== ========
17. BORROWINGS (CURRENT)
Bills of exchange......................... 175 -- -- --
Bank loans................................ 1,000 3,300 -- --
Bank overdrafts........................... 398 225 -- 69
Related parties
Controlled entity......................... -- -- 2,286 1,300
Other related parties..................... -- 1 -- --
------ ------ -------- --------
1,573 3,526 2,286 1,369
====== ====== ======== ========
18. PROVISIONS (CURRENT)
Taxation.................................. 8,535 4,124 (99) 32
Employee entitlements..................... 5,066 5,380 576 455
Other..................................... 1,731 4,032 -- --
------ ------ -------- --------
15,332 13,536 477 487
====== ====== ======== ========
</TABLE>
F-47
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
19. ACCOUNTS PAYABLE (NON-CURRENT)
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- -----------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Lease liability.............................. -- 22 -- --
20. BORROWINGS (NON-CURRENT)
Bills of Exchange and Bank Loans............. 11,300 11,500 -- 1,500
Other........................................ 2 -- -- --
------ ------ -------- --------
11,302 11,500 -- 1,500
====== ====== ======== ========
Refer to Note 28 for details of security held over borrowings.
21. PROVISIONS (NON-CURRENT)
Employee entitlements........................ 2,624 3,125 474 330
Deferred income tax liability................ 2,455 2,642 -- --
------ ------ -------- --------
5,079 5,767 474 330
====== ====== ======== ========
22. SHARE CAPITAL
Issued and fully paid up capital
6,187,500 "A' class shares of A$1 each..... 6,188 6,188 6,188 6,188
6,187,500 "B' class shares of A$1 each..... 6,188 6,188 6,188 6,188
2,183,824 "C' class shares of A$1 each..... 2,183 2,183 2,183 2,183
------ ------ -------- --------
14,559 14,559 14,559 14,559
====== ====== ======== ========
23. RESERVES
Reserves comprise:
Share premium account...................... 2,330 2,330 2,330 2,330
Asset revaluation.......................... 1,625 1,625 12,028 12,028
Foreign currency translation............... 532 1,974 -- --
Other reserves of associate................ -- 1,454 -- --
Equity cross-holding reserve............... -- (378) -- --
------ ------ -------- --------
Total reserves........................... 4,487 7,005 14,358 14,358
====== ====== ======== ========
Movement in reserves
Foreign currency translation
Balance at beginning of year.............. 1,934 532 -- --
Transfer to outside equity interests...... (597) -- -- --
Gain/(loss) on translation of overseas
controlled entities...................... (805) 1,442 -- --
------ ------ -------- --------
Balance at end of year.................... 532 1,974 -- --
====== ====== ======== ========
Equity cross-holding reserve
Adjustment for initial application of eq-
uity accounting........................... -- (356) -- --
Movement during the year................... -- (22) -- --
------ ------ -------- --------
Balance at end of year..................... -- (378) -- --
====== ====== ======== ========
</TABLE>
F-48
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
24. OUTSIDE EQUITY INTEREST
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- ------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Reconciliation of outside equity interest
in controlled entities:
--Opening balance....................... 15,518 8,173 -- --
--Add: outside equity interest in trans-
lation reserve not
previously brought to account...... 597 -- -- --
--Add: share of operating profit........ 2,750 1,877 -- --
--Less: dividends paid.................. (2,790) (1,496) -- --
--Less: purchase of outside equity in-
terest in subsidiary................... (7,535) -- -- --
--Add: share of movement in reserves.... (367) 237 -- --
------ ------ --------- --------
--Closing balance....................... 8,173 8,791 -- --
====== ====== ========= ========
25. STATEMENT OF CASH FLOWS
a) Reconciliation of cash
Cash balance comprises:
--cash on hand........................ 1,805 6,379 10 --
--short-term deposits................. 2,543 1,581 -- --
--bank overdraft...................... (398) (225) -- (69)
------ ------ --------- --------
Closing cash balance.................... 3,950 7,735 10 (69)
====== ====== ========= ========
b) Reconciliation of the operating profit
after tax to the net cash flows from
operations
Operating profit after tax.............. 18,797 18,938 11,263 6,763
Dividends received (investing).......... (986) -- -- --
Depreciation and amortisation
--property, plant and equipment....... 10,500 10,689 44 40
--intangibles......................... 144 146 -- --
Diminution in value of inventories........ 345 57 -- --
Loss on write-off of investments.......... 50 -- 50 --
Provision for employee entitlements....... 3,786 3,116 559 (265)
(Profit)/loss on sale of non-current as-
sets..................................... 46 (38) -- (8)
Equity income of associate company........ -- (4,505) -- --
Partnership income........................ -- (624) -- --
Changes in assets and liabilities
Trade receivables....................... 247 (3,204) -- --
Inventory............................... (896) (3,742) -- --
Prepayments............................. (915) 854 -- (36)
Other Current Assets.................... 808 (92) 723 3
Other Non-Current Assets................ (691) (559) -- --
</TABLE>
F-49
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
-------------- -------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Trade Creditors........................ (1,657) 738 (45) 125
Other Current Liabilities.............. 1,498 (1,267) 3 --
Other Non-Current Liabilities.......... (2,067) 20 -- --
Tax Provision.......................... 1,820 (4,411) (314) 131
Deferred income tax liability.......... (162) 187 -- --
Future income tax benefit.............. (965) (1,159) (53) (89)
Exchange rate changes on opening cash.. 249 (143) -- --
------ ------ --------- --------
Net cash flow from operating activities.. 29,951 16,119 12,230 6,664
====== ====== ========= ========
c) Bank overdraft facility
Refer to note 28 for details of group bank facility
26. EXPENDITURE COMMITMENTS
Capital expenditure commitments
Estimated capital expenditure contracted
for at balance date but not provided for
--payable not later than one year...... -- 516 -- --
====== ====== ========= ========
Lease expenditure commitments
Operating leases (non-cancelable):
--Not later than one year.............. 836 707 427 321
--Later than one year and not later
than two years........................ 729 434 321 --
--Later than two years and not later
than five years....................... 1,017 642 -- --
--Later than five years................ 212 2,481 -- --
------ ------ --------- --------
Aggregate lease expenditure contracted
for at balance date but not provided
for..................................... 2,794 4,264 748 321
====== ====== ========= ========
Finance leases:
--Not later than one year.............. -- 46 -- --
--Later than one year and not later
than two years........................ -- 22 -- --
--Later than two years and not later
than five years....................... -- -- -- --
--Later than five years................ -- -- -- --
------ ------ --------- --------
Total minimum lease payments........... -- 68 -- --
Future finance charges................. -- -- -- --
------ ------ --------- --------
Lease liability........................ -- 68 -- --
====== ====== ========= ========
Current liability...................... -- 46 -- --
Non-current liability.................. -- 22 -- --
------ ------ --------- --------
-- 68 -- --
====== ====== ========= ========
</TABLE>
F-50
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
27. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS
EMPLOYEE ENTITLEMENTS
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
------------- -------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
The aggregate employee entitlement liability
is comprised of:
Accrued wages, salaries and oncosts....... 52 155 -- --
Provisions (current)...................... 5,066 5,380 576 455
Provisions (non-current).................. 2,624 3,125 474 330
----- ----- --------- -------
7,742 8,660 1,050 785
===== ===== ========= =======
</TABLE>
Superannuation Commitments
All employees are entitled to varying levels of benefits on retirement,
disability or death. The superannuation plan provides defined benefits based
on years of service and final average salary. Employees contribute to the
plans at various percentages of their wages and salaries. Up until the year
ended 30 June 1994, the economic entity did not contribute to the plan.
Commencing this year, the economic entity has contributed to the plan amounts
advised by the plan manager. These contributions are not of a systematic and
long-term nature as the plan has sufficient funds to satisfy all benefits
vested under the plan as at 30 June 1997.
Details of the superannuation fund as extracted from the fund's most recent
annual report (31 August 1996) are as follows:
<TABLE>
<CAPTION>
A$'000
<S> <C>
Accrued benefits......................................................... 13,371
Net market value of plan assets.......................................... 14,116
------
Surplus of net market value of plan assets over accrued benefits......... 745
======
Vested benefits
</TABLE>
Actuarial assessment of the plan was made in February 1995 by Watson Wyatt
Worldwide.
28. CONTINGENT LIABILITIES
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
------------- ------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Bank guarantees covering security deposits,
contract performance and autopay............. 1,618 2,071 1,618 2,071
===== ===== ======== ========
</TABLE>
Koppers Australia Pty. Limited and related companies, namely Koppers Power
Poles (Australia) Pty. Limited, Koppers Coal Tar Products Pty. Ltd.,
Continental Carbon Australia Pty. Limited, Koppers Timber Preservation Pty.
Ltd. and Koppers Investments (Aust.) Pty. Limited have collectively
unrestricted access to borrowing facilities to a maximum of A$47,850,000.
The amount of credit unused at 30 June 1997 totaled A$36,350,000.
The securities held by the bank over the above facilities comprise:
1. Guarantee (unlimited) by Koppers Power Poles (Australia) Pty. Limited,
Koppers Investments (Aust.) Pty. Limited, Koppers Timber Preservation
Pty. Ltd., Koppers Coal Tar Products Pty. Ltd., Koppers Australia Pty.
Limited and Continental Carbon Australia Pty. Limited.
F-51
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
2. Letter of Comfort by BHP and Koppers Industries, Inc.
3. Negative Pledge dated 2 July 1990.
In addition, a fully interlocking guarantee has been provided by the above-
mentioned related companies, to provide security over the borrowing facilities
of the company and its related companies. Under the terms of an ASC Class
Order these above mentioned companies have guaranteed any deficiency of funds
if any of the companies is wound up. No such deficiency exists. Refer to note
12.
29. AUDITORS' REMUNERATION
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
------------- -------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Amounts received or due and receivable by
the auditors, of Koppers Australia Pty.
Limited for:
-- an audit or review of the financial
statements of the entity and any other
entity in the economic entity......... 227 224 36 36
-- other services in relation to the en-
tity and any other entity in the eco-
nomic entity.......................... 63 54 10 46
Amounts received or due and receivable by
auditors other than the
auditors of Koppers Australia Pty. Lim-
ited for:
-- an audit or review of the financial
statements of
subsidiary entities................... 17 37 -- --
--- --- -------- --------
307 315 46 82
=== === ======== ========
</TABLE>
30. SUBSEQUENT EVENTS
There has been no significant event since balance date which requires
disclosure or adjustment in the financial statements of the entity.
31. RELATED PARTY DISCLOSURES
The directors of Koppers Australia Pty. Limited during the financial year
were:
D.P. Traviss (Resigned 24 June 1997);
E.S. Bryon;
M.J. Burns;
D.R. Zimmerman;
B.K. Jensen;
P.J. Laver;
R.K. Wagner;
C.R. Newell;
A.K. Purnell (Resigned 22 May 1997);
B.C. Wilson
The following related party transactions occurred during the financial year:
Transactions with other related parties
i) Dividends received of A$980,769. (1996: A$986,193)
F-52
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
Transactions with the Directors of Koppers Australia Pty. Limited and the
economic entity:
Since 1992 Koppers Australia Pty. Limited has issued units in a management
incentive scheme to various executives of the group. Unit holders are
entitled, but not obliged, to exchange all or some of their units for cash
after holding units for a qualifying period of three years. The executives are
obliged to exchange all units for cash on their resignation, retirement or
dismissal from employment.
The growth in value of these units, and the resulting benefit to the
executives, is determined by reference to the profitability after tax of the
Koppers Australia group. Benefits from this scheme are funded by companies
within the Koppers Australia group. Three directors of Koppers Australia Pty.
Limited have been issued units in this scheme in accordance with the plan
rules. As at 30 June 1997, the combined value of the units issued to the above
directors is A$358,270 (1996: A$291,840).
There have been no other transaction concerning shares between entities in
the reporting entity and directors of the reporting entity or their director-
related entities.
All financial benefits provided by Koppers Australia Pty. Limited or its
controlled entities to related parties were provided at arms' length terms.
Koppers Australia Pty. Limited is the ultimate Australian holding company.
32. SEGMENT INFORMATION
The economic entity operates predominantly in four industries--timber
preservation, chemicals, carbon black and coal tar products, and in four
geographical areas--Australia, P.N.G., New Zealand and Fiji and South East
Asia. The manufacturing operations comprise the refinement and distribution of
coal tar products, the manufacture of wood preservation chemicals, the
preservation of timber products and carbon black.
F-53
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
30 JUNE 1997
<TABLE>
<CAPTION>
TIMBER CARBON COAL TAR
PRESERVATION CHEMICALS BLACK PRODUCTS OTHER ELIMINATIONS
NOTES A$'000 A$'000 A$'000 A$'000 A$'000 A$'000
1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(a) Industry
Segments
OPERATING
REVENUE
Sales to
customers
outside the
economic
entity......... 28,831 34,424 42,621 40,046 33,220 35,638 62,142 62,656 4,646 1,019 -- --
Intersegment
Sales.......... 2 131 169 3,182 3,295 15 -- 2,505 14,265 9,798 14,800 (15,631) (32,529)
------- ------- ------ ------ ------ ------ ------ ------ ------- ------- ------- -------
28,962 34,593 45,803 43,341 33,235 35,638 64,647 76,921 14,444 15,819 (15,631) (32,529)
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
Consolidated
Operating
Profit/(Loss).. 2 1,297 1,743 6,228 6,054 4,575 5,783 8,947 15,240 12,448 13,296 (5,181) (12,922)
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
Segment Assets.. 29,016 27,378 28,622 26,281 22,154 20,970 73,640 68,437 91,158 74,146 (77,184) (72,624)
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
<CAPTION>
CONSOLIDATION
A$'000
1997 1996
<S> <C> <C>
(a) Industry
Segments
OPERATING
REVENUE
Sales to
customers
outside the
economic
entity......... 171,460 173,783
Intersegment
Sales.......... -- --
------- -------
171,460 173,783
======= =======
Consolidated
Operating
Profit/(Loss).. 28,314 29,194
======= =======
Segment Assets.. 167,406 144,588
======= =======
(b) Geographical
Segments
<CAPTION>
NEW ZEALAND,
FIJI & SOUTH EAST
AUSTRALIA P.N.G. STH AFRICA ASIA ELIMINATIONS CONSOLIDATION
A$'000 A$'000 A$'000 A$'000 A$'000 A$'000
OPERATING REVENUE 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to
customers
outside the
economic
entity......... 140,460 145,947 513 676 19,522 19,891 10,965 7,269 -- -- 171,460 173,783
Intersegment
Sales.......... 15,455 32,242 -- -- 176 287 -- -- (15,631) (32,529) -- --
------- ------- ------ ------ ------ ------ ------ ------ ------- ------- ------- -------
2 155,915 178,189 513 676 19,698 20,178 10,965 7,269 (15,631) (32,529) 171,460 173,783
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
Consolidated
Operating
Profit......... 2 28,540 37,659 92 9 3,440 3,760 1,443 688 (5,181) (12,922) 28,334 29,194
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
Segment Assets.. 225,757 200,627 622 575 13,478 13,272 4,426 2,738 (77,184) (72,624) 167,099 144,588
======= ======= ====== ====== ====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
F-54
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS--(CONTINUED)
33. REMUNERATION OF DIRECTORS
<TABLE>
<CAPTION>
KOPPERS AUSTRALIA
CONSOLIDATED PTY. LIMITED
------------- -------------------
1996 1997 1996 1997
A$'000 A$'000 A$'000 A$'000
<S> <C> <C> <C> <C>
Income paid or payable, or otherwise made
available, in respect of the financial
year, to all directors of each entity in
the economic entity, directly or
indirectly, by the entities of which they
are directors or any related party......... 1,836 1,919
===== =====
Income paid or payable, or otherwise made
available, in respect of the financial
year, to all directors of Koppers Australia
Pty. Limited, directly or indirectly, from
the entity or any related party............ 836 1,028
======= =========
The number of directors of Koppers Australia
Pty. Limited whose remuneration (including
superannuation contributions) falls within
the following bands:
$0 --$ 9,999.......................... 8 8
$190,000--$199,999.......................... 1 --
$220,000--$229,999.......................... -- 1
$250,000--$259,999.......................... 1 --
$270,000--$279,999.......................... -- 1
$350,000--$359,999.......................... -- --
$380,000--$389,999.......................... 1 --
$530,000--$539,999.......................... -- 1
------- ---------
11 11
======= =========
</TABLE>
In the opinion of the directors, remuneration paid to directors is considered
reasonable.
F-55
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
(IN THOUSANDS OF AUSTRALIAN DOLLARS)
THREE MONTHS ENDED 30 SEPTEMBER 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
(UNAUDITED)
<S> <C> <C>
SALES........................................................... $43,627 $43,692
GROSS PROFIT.................................................... 13,762 12,906
SELLING, GENERAL & ADMINISTRATIVE............................... 3,606 3,633
DEPRECIATION.................................................... 2,829 2,955
------- -------
EARNINGS BEFORE INTEREST & TAXES................................ 7,327 6,318
INTEREST EXPENSE................................................ 235 202
EQUITY INCOME................................................... 276 3,631
INCOME TAX...................................................... 2,523 2,298
------- -------
NET INCOME BEFORE MINORITY INTEREST 4,845 7,449
MINORITY INTEREST............................................... 511 455
------- -------
NET INCOME...................................................... $ 4,334 $ 6,994
======= =======
</TABLE>
See accompanying notes.
F-56
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF AUSTRALIAN DOLLARS)
AT 30 SEPTEMBER 1997
<TABLE>
<CAPTION>
1997
(UNAUDITED)
<S> <C>
Cash................................................................ $ 8,564
Receivables......................................................... 32,242
Inventory........................................................... 41,945
Other Current Assets................................................ 715
Net Fixed Assets.................................................... 63,276
Investments......................................................... 25,046
Goodwill............................................................ 1,262
--------
TOTAL ASSETS.................................................... $173,050
========
Creditors........................................................... 12,855
Short Term Loans.................................................... 2,047
Other Current Liabilities........................................... 11,447
Long Term Loans..................................................... 12,800
Other Non-Current Liabilities....................................... 3,947
--------
TOTAL LIABILITIES............................................... $ 43,096
========
Share Capital....................................................... 14,559
Reserves............................................................ 7,877
Profit & Loss Appropriation......................................... 98,567
Minority Interest................................................... 8,951
--------
TOTAL SHAREHOLDERS' EQUITY...................................... $129,954
========
</TABLE>
See accompanying notes.
F-57
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
(ACN 000 566 629)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF AUSTRALIAN DOLLARS)
THREE MONTHS ENDED 30 SEPTEMBER 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
(UNAUDITED)
<S> <C> <C>
CASH FROM OPERATIONS.......................................... $ 8,523 $ 8,877
INCREASE IN WORKING CAPITAL................................... 1,429 365
CAPITAL EXPENDITURES.......................................... (2,201) (2,061)
CASH TAXES.................................................... (1,469) (1,854)
DIVIDENDS RECEIVED............................................ 243 261
------- -------
CASH SURPLUS.................................................. $ 6,525 $5,588
======= =======
</TABLE>
See accompanying notes.
F-58
<PAGE>
KOPPERS AUSTRALIA PTY. LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The audited financial statements of Koppers Australia Pty. Limited
("Koppers Australia") for the Fiscal years ended June 30, 1996 and 1997
include additional information about Koppers Australia, its operations,
and its financial position, and should be read in conjunction with these
unaudited interim financial statements.
(2) The results for the interim periods are not necessarily indicative of the
results to be expected for the full year.
(3) In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
(4) The financial statements have been prepared using accounting policies
consistent with those used for the year ended June 30, 1997.
F-59
<PAGE>
No dealer, salesperson or other individual has been authorized to give any in-
formation or to make any representations not contained in this Prospectus. If
given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any security other than
the securities to which it relates, any offer to sell or a solicitation of an
offer to buy the Notes in any jurisdiction where, or to any person to whom, it
is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Prospectus Summary......................................................... 4
Risk Factors............................................................... 16
Company History............................................................ 24
Transactions............................................................... 24
Use of Proceeds............................................................ 26
Capitalization............................................................. 27
Selected Historical Consolidated Financial Information..................... 29
Unaudited Pro Forma Condensed Consolidated Financial Statements............ 31
Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 37
Business................................................................... 46
Management................................................................. 67
Principal Stockholders..................................................... 73
Certain Relationships and Related Transactions............................. 75
Description of New Credit Facilities....................................... 75
Description of Notes....................................................... 78
The Exchange Offer......................................................... 106
Federal Income Tax Consequences of Owning
New Notes................................................................. 113
Plan of Distribution....................................................... 115
Legal Matters.............................................................. 115
Independent Auditors....................................................... 116
Available Information...................................................... 116
Index to Financial Statements.............................................. F-1
</TABLE>
$175,000,000
[LOGO OF KOPPERS INDUSTRIES]
Offer To Exchange
9 7/8% Senior Subordinated
Notes due 2007, which
have been registered
under the Securities Act,
for its 9 7/8% Senior
Subordinated Notes due
2007, which have not been
so registered.
--------------
PROSPECTUS
--------------
January , 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 1741 and 1742 of the BCL provide that a business corporation shall
have the power to indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was servicing at the
request of the corporation as a director, officer, employee or agent of
another corporation or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. In the case of an action by or in
the right of the corporation, such indemnification is limited to expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to the corporation unless,
and only to the extent that, a court determines upon application that, despite
the adjudication of liability but in view of all the circumstances, such
person is fairly and reasonably entitled to indemnity for the expenses that
the court deems proper.
BCL Section 1744 provides that, unless ordered by a court, any
indemnification referred to above shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct. Such determination shall be made:
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding; or
(2) if such a quorum is not obtainable, or if obtainable and a majority
vote of a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion; or
(3) by the shareholders.
Notwithstanding of the above, BCL Section 1743 provides that to the extent
that a director, officer, employee or agent of a business corporation is
successful on the merits or otherwise in defense of any proceeding referred to
above, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
BCL Section 1745 provides that expenses (including attorney's fees) incurred
by an officer, director, employee or agent of a business corporation in
defending any proceeding may be paid by the corporation in advance of the
final deposition of the proceeding upon receipt of an undertaking to repay the
amount advanced if it is ultimately determined that the indemnitee is not
entitled to be indemnified by the corporation.
BCL Section 1746 provides that the indemnification and advancement of
expenses provided by, or granted pursuant to, the foregoing provisions are not
exclusive of any other rights to which a person seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or directors or
otherwise, and that indemnification may be granted under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise for any action
taken or any failure to take any action whether or not the corporation would
have the power to indemnify the person under any other provision of law and
whether or not the indemnified liability arises or arose form any action by or
in the right of the corporation, provided, however, that no indemnification is
determined by a court to have constituted willful misconduct or recklessness.
II-1
<PAGE>
BCL Section 1747 permits a Pennsylvania business corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against any liability asserted against such
person and incurred by him in any such capacity, or arising out of his status
as such, whether or not the corporation would have the power to indemnify the
person against such liability under the provisions described above.
The Registrant's Articles of Incorporation and Bylaws provide for (i)
indemnification of directors, officers, employees and agents of the registrant
and its subsidiaries and (ii) the elimination of a director's liability for
monetary damages, to the maximum extent permitted by the BCL. The Registrant
also maintains directors' and officers' liability insurance covering its
directors and officers with respect to liabilities, including liabilities
under the Securities Act of 1933, as amended, which they may incur in
connection with their serving as such.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <C> <S>
1.1 -- Purchase Agreement dated as of November 20, 1997 between the
Registrant and SBC Warburg Dillon Read, Inc.
*2.1 -- Agreement for Sale of Shares by and among BHP Nominees
Investments No. 3 Pty Ltd, The Broken Hill Proprietary Company
Limited, Koppers Industries, Inc., Koppers Australia Pty
Limited, Continental Carbon Australia Pty Limited and KAP
Investments, Inc.
*2.2 -- Variation Agreement by and among BHP Nominees Investments No.
3 Pty Ltd, The Broken Hill Proprietary Company Limited,
Koppers Industries, Inc., Koppers Australia Pty Limited,
Continental Carbon Australia Pty Limited and KAP Investments,
Inc.
3.1 -- Restated and Amended Articles of Incorporation of the Company
(Incorporated by reference from Exhibit 4.1 of the Company's
Form S-8 Registration Statement filed December 22, 1997).
3.2 -- Restated and Amended Bylaws of the Company (Incorporated by
reference from Exhibit 4.2 of the Company's Form S-8
Registration Statement filed December 22, 1997).
*4.1 -- Indenture between the Company and Integra Trust Company,
National Association, as Trustee (Incorporated by reference to
respective exhibits to the Company's Form 10-K for the year
ended December 31, 1993).
4.2 -- Indenture, dated as of December 1, 1997 between the Company
and PNC Bank, National Association (the "Trustee").
4.3 -- Form of Note (contained in Indenture filed as Exhibit 4.2).
4.4 -- Registration Rights Agreement dated as of December 1, 1997
between the Registrant and the Purchasers.
**5.1 -- Opinion of Dickie, McCamey & Chilcote, P.C.
**8.1 -- Opinion Regarding Tax Matters.
*9.1 -- Stockholders' Agreement by and among Koppers Industries, Inc.,
KAP Investments, Inc., Cornerstone-Spectrum, Inc., APT
Holdings Corporation and the Management Investors referred to
therein, as amended, the most recent amendment dated as of
August 16, 1995 (Incorporated by reference to respective
exhibits to the Company's Amendment No. 1 to Form S-1
Registration Statement filed June 18, 1996 in connection with
the offering of 7,001,922 shares of Common Stock).
*9.2 -- Stock Subscription Agreement dated as of December 26, 1988
(Incorporated by reference to respective exhibits to the
Company's Prospectus filed February 7, 1994 pursuant to Rule
424(b) of the Securities Act of 1933, as amended, in
connection with the offering of the 8 1/2% Senior Notes due
2004).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <C> <S>
9.3 -- Stockholders' Agreement by and among Koppers Industries, Inc.,
Saratoga Partners III, L.P. and the Management Investors
referred to therein, dated December 1, 1997 (Incorporated by
reference from Exhibit 4.3 of the Company's Form S-8
Reigstration Statement filed December 22, 1997).
*10.1 -- Asset Purchase Agreement, dated as of December 28, 1988,
between the Company and Koppers Company, Inc. (Incorporated by
reference to respective exhibits to the Company's Prospectus
filed February 7, 1994 pursuant to Rule 424(b) of the
Securities Act of 1933, as amended, in connection with the
offering of the 8 1/2% Senior Notes due 2004).
*10.2 -- Asset Purchase Agreement Guarantee, dated as of December 28,
1988, provided by Beazer PLC (Incorporated by reference to
respective exhibits to the Company's Prospectus filed February
7, 1994 pursuant to Rule 424(b) of the Securities Act of 1933,
as amended, in connection with the offering of the 8 1/2%
Senior Notes due 2004).
*10.3 -- Credit Agreement, dated as of February 10, 1994 by and between
the Company, the Banks from time to time parties thereto and
Mellon Bank, N.A., as agent (Incorporated by reference to
respective exhibits to the Company's Form 10-K for the year
ended December 31, 1993).
*10.4 -- Revolving Credit Agreement, dated as of February 10, 1994,
from the Company to the Banks and Mellon Bank, N.A.
(Incorporated by reference to respective exhibits to the
Company's Form 10-K for the year ended December 31, 1993).
*10.5 -- Term Loan Agreement, dated as of February 10, 1994, from the
Company to the Banks and Mellon Bank, N.A. (Incorporated by
reference to respective exhibits to the Company's Form 10-K
for the year ended December 31, 1993).
*10.6 -- Retirement Plan of Koppers Industries, Inc. and Subsidiaries
for Salaried Employees (Incorporated by reference to
respective exhibits to the Company's Prospectus filed February
7, 1994 pursuant to Rule 424(b) of the Securities Act of 1933,
as amended, in connection with the offering of the 8 1/2%
Senior Notes due 2004).
*10.7 -- Koppers Industries, Inc. Non-contributory Long Term Disability
Plan for Salaried Employees (Incorporated by reference to
respective exhibits to the Company's Prospectus filed February
7, 1994 pursuant to Rule 424(b) of the Securities Act of 1933,
as amended, in connection with the offering of the 8 1/2%
Senior Notes due 2004).
*10.8 -- Koppers Industries, Inc. Employee Savings Plan (Incorporated
by reference to respective exhibits to the Company's
Prospectus filed February 7, 1994 pursuant to Rule 424(b) of
the Securities Act of 1933, as amended, in connection with the
offering of the 8 1/2% Senior Notes due 2004).
*10.9 -- Koppers Industries, Inc. 1989 Salaried Incentive Plan
(Incorporated by reference to respective exhibits to the
Company's Prospectus filed February 7, 1994 pursuant to Rule
424(b) of the Securities Act of 1933, as amended, in
connection with the offering of the 8 1/2% Senior Notes due
2004).
*10.10 -- Koppers Industries, Inc. Survivor Benefit Plan (Incorporated
by reference to respective exhibits to the Company's
Prospectus filed February 7, 1994 pursuant to Rule 424(b) of
the Securities Act of 1933, as amended, in connection with the
offering of the 8 1/2% Senior Notes due 2004).
*10.11 -- Koppers Industries, Inc. Stock Option Plan (Incorporated by
reference to respective exhibits to the Company's Prospectus
filed February 7, 1994 pursuant to Rule 424(b) of the
Securities Act of 1933, as amended, in connection with the
offering of the 8 1/2% Senior Notes due 2004).
*10.14 -- Bethlehem Steel Corporation Furnace Coke Sales Agreement dated
as of May 1, 1990 (Incorporated by reference to respective
exhibits to the Company's Prospectus filed February 7, 1994
pursuant to Rule 424(b) of the Securities Act of 1933, as
amended, in connection with the offering of the 8 1/2% Senior
Notes due 2004).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <C> <S>
*10.15 -- LTV Steel Company, Inc. Coke Sales Agreement dated as of
December 10, 1993 (Incorporated by reference to respective
exhibits to the Company's Prospectus filed February 7, 1994
pursuant to Rule 424(b) of the Securities Act of 1933, as
amended, in connection with the offering of the 8 1/2% Senior
Notes due 2004).
*10.16 -- Alcoa/Koppers Solid Pitch Supply Agreement Warrick, Indiana;
Rockdale, Texas; Point Comfort, Texas; and Wenatchee,
Washington dated as of January 1, 1994 (Incorporated by
reference to respective exhibits to the Company's Form 10-K
for the year ended December 31, 1993).
*10.18 -- Employment Contract for Donald P. Traviss dated October 17,
1994 (Incorporated by reference to respective exhibits to the
Company's Form 10-K for the year ended December 31, 1995).
10.19 -- Employment Contract for Robert K. Wagner dated February 29,
1996 to the Company, as revised on October 31, 1995.
*10.20 -- Standby Term Loan Agreement, dated as of March 31, 1995 from
the Company to the Banks and Mellon Bank, N.A. (Incorporated
by reference to respective exhibits to the Company's Form 10-K
for the year ended December 31, 1995).
*10.21 -- Amendment to Standby Term Loan Agreement, dated as of March
18, 1996 from the Company to the Banks and Mellon Bank, N.A.
(Incorporated by reference to respective exhibits to the
Company's Form 10-K for the year ended December 31, 1995).
*10.22 -- Amendment to Revolving Credit Agreement, dated as of March 18,
1996 from the Company to the Banks and Mellon Bank, N.A.
(Incorporated by reference to respective exhibits to the
Company's Form 10-K for the year ended December 31, 1995).
*10.23 -- Asset Purchase Agreement, dated as of March 11, 1996, between
the Company and Aristech Chemicals Corporation (Incorporated
by reference to respective exhibits to the Company's Form 10-K
for the year ended December 31, 1995).
*10.24 -- Term Loan Agreement, dated as of March 18, 1996 from the
Company to the Banks and Mellon Bank, N.A. (Incorporated by
reference to respective exhibits to the Company's Form 10-K
for the year ended December 31, 1995).
*10.25 -- Restated and Amended Employee Stock Option Plan. (Incorporated
by reference to respective exhibits to the Company's amendment
No. 1 to Form S-1 Registration Statement filed June 18, 1996
in connection with the offering of 7,001,922 shares of Common
Stock).
*10.26 -- Employment Contract for Donald N. Sweet dated August 1, 1996
(Incorporated by reference
to respective exhibits to the Company's Form 10-Q for the
quarterly period ended
September 30, 1996).
*10.27 -- Volume Treatment Agreement CSX--Koppers dated as of January
30, 1997 (Incorporated
by reference to respective exhibits to the Company's Form 10-K
for the year ended
December 31, 1996).
10.28 -- Credit Agreement, dated as of December 1, 1997 by and among
the Company, the Banks from time to time parties thereto and
Swiss Bank Corporation and Mellon Bank, N.A.
10.29 -- Advisory Services Agreement between the Company and Saratoga
Partners III, L.P.
11.1 -- Statement Regarding Computation of Per Share Earnings.
12.1 -- Computation of Ratio of Earnings to Fixed Charges.
21.1 -- Amended List of Subsidiaries of the Company.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <C> <S>
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Ernst & Young.
23.3 -- Consent of Baker & McKenzie.
**23.4 -- Consent of Dickie, McCamey & Chilcote, P.C. (included in
Exhibit 5.1).
**24.1 -- Power of Attorney (appearing on Signature Page).
25.1 -- Form T-1 Statement of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal and Notice of Guaranteed
Delivery.
</TABLE>
- ---------------------
*Previously filed.
**To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
(i) Report of independent auditor on financial statement schedule.
(ii) Schedule II
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
ITEM 22. UNDERTAKINGS.
The Registrant hereby undertakes that
(a) (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 exchange offer 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 exchange offer as
of the time it 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 exchange offer 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted for 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pittsburgh, Pennsylvania on
December 22, 1997.
KOPPERS INDUSTRIES, INC.
/s/ Robert K. Wagner
By:----------------------------------
Robert K. Wagner
Chairman
/s/ Clayton A. Sweeney
By:----------------------------------
Clayton A. Sweeney
Director
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Robert K. Wagner and Clayton A. Sweeney and each acting alone, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments or supplements to this Registration
Statement and to file the same with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing necessary or appropriate to be done with
this Registration Statement and any amendments or supplements hereto, as fully
to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE(S) DATE
/s/ Robert K. Wagner Chairman and Director and Acting December 22,
- ----------------------------- Chief Executive Officer 1997
Robert K. Wagner (Principal Executive Officer)
* Chief Financial Officer December 22,
- ----------------------------- (Principal Financial Officer, 1997
Donald E. Davis Principal Accounting Officer)
/s/ Clayton A. Sweeney Director December 22,
- ----------------------------- 1997
Clayton A. Sweeney
* Director December 22,
- ----------------------------- 1997
Brooks C. Wilson
* Director December 22,
- ----------------------------- 1997
N.H. Prater
II-6
<PAGE>
SIGNATURE TITLE(S) DATE
* Director December 22,
- ----------------------------- 1997
Christian L. Oberbeck
/s/ Clayton A. Sweeney
- -----------------------------
Clayton A. Sweeney
* By power of attorney
II-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors Koppers Industries, Inc.
We have audited the consolidated financial statements of Koppers Industries,
Inc. as of December 31, 1995 and 1996, and for each of the three years in the
period ended December 31, 1996, and have issued our report thereon dated
February 18, 1997. Our audits also included the financial statement schedule
listed in Item 21(b)(ii) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
Pittsburgh, Pennsylvania
February 18, 1997
1
<PAGE>
SCHEDULE II
KOPPERS INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
FOR THE YEARS ENDED
DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED AT CLOSE
OF YEAR TO INCOME DEDUCTIONS OF YEAR
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
1994
Allowance for doubtful accounts........ $247 $150 $101 $296
==== ==== ==== ====
1995
Allowance for doubtful accounts........ $296 $241 $195 $342
==== ==== ==== ====
1996
Allowance for doubtful accounts........ $342 $133 $311 $164
==== ==== ==== ====
</TABLE>
2
<PAGE>
Exhibit 1.1
KOPPERS INDUSTRIES, INC.
$175,000,000 9-7/8% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
------------------
November 20, 1997
SBC WARBURG DILLON READ INC.
as Initial Purchaser
535 Madison Avenue
New York, New York 10022
Dear Sirs:
Koppers Industries, Inc. (the "Company"), a Pennsylvania corporation,
-------
proposes to issue and sell to SBC Warburg Dillon Read Inc. (the "Initial
-------
Purchaser") $175,000,000 aggregate principal amount of its 9-7/8% Senior
- ---------
Subordinated Notes due 2007 (the "Notes"). The Notes will be issued pursuant to
-----
an indenture (the "Indenture"), to be dated the Closing Date (as defined below),
---------
by and among the Company, the guarantors listed on the signature pages hereto
(collectively, the "Subsidiary Guarantors") and PNC Bank, National Association,
---------------------
as trustee (the "Trustee"). The Company's obligations under the Notes and the
-------
Exchange Notes (as defined below) will be unconditionally guaranteed on a senior
subordinated basis by each of the Subsidiary Guarantors pursuant to each of
their guarantees (the "Subsidiary Guarantees"). All references herein to the
---------------------
Notes or the Exchange Notes include the related guarantees, unless the context
otherwise requires. Capitalized terms used but not otherwise defined herein
shall have the meanings given to such terms in the Indenture or the Offering
Memorandum (as defined below).
The Notes will be offered and sold to the Initial Purchaser pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended, and the rules and regulations thereunder (collectively, the "Act")
---
(the "Offering"). The Company has prepared a preliminary offering memorandum,
--------
dated October 30, 1997 (the "Preliminary Offering Memorandum"), and a final
-------------------------------
offering memorandum, dated and available for distribution on the date hereof
(the "Offering Memorandum"), relating to the Company, the Subsidiary Guarantors
-------------------
and the Notes.
<PAGE>
-2-
The Initial Purchaser has advised the Company that the Initial Purchaser
intends, as soon as it deems advisable after this Purchase Agreement has been
executed and delivered, to resell (the "Exempt Resales") the Notes purchased by
--------------
the Initial Purchaser under this Purchase Agreement (this "Agreement") in
---------
private sales exempt from registration under the Act on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to (i) persons whom
the Initial Purchaser reasonably believes to be "qualified institutional
buyers," as defined in Rule 144A under the Act ("QIBs"), in compliance with Rule
----
144A and (ii) other eligible purchasers pursuant to offers and sales that occur
outside the U.S. within the meaning of Regulation S under the Act; the persons
specified in clauses (i)-(ii) are sometimes collectively referred to herein as
the "Eligible Purchasers."
-------------------
Holders (including subsequent transferees) of the Notes will have the
registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, substantially in
- ------------------------------
the form of Exhibit A to this Agreement, for so long as such Notes constitute
---------
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Subsidiary Guarantors will agree to (A) file with the Securities and Exchange
Commission (the "Commission"), under the circumstances set forth in the
----------
Registration Rights Agreement, (i) a registration statement under the Act (the
"Exchange Offer Registration Statement") relating to the Company's 9-7/8% Senior
- --------------------------------------
Subordinated Notes due 2007 to be offered in exchange (the "Exchange Notes") for
--------------
the Notes (the "Exchange Offer") and/or (ii) a shelf registration statement
--------------
pursuant to Rule 415 under the Act (the "Shelf Registration Statement" and,
----------------------------
together with the Exchange Offer Registration Statement, the "Registration
------------
Statements") relating to the resale by certain holders of the Notes, and (B) use
- ----------
their best efforts to cause such Registration Statements to be declared
effective as soon as practicable. This Agreement, the Notes, the Exchange
Notes, the Indenture and the Registration Rights Agreement are hereinafter
sometimes referred to collectively as the "Operative Documents."
-------------------
Upon original issuance of the Notes and until such time as the same is no
longer required under the applicable requirements of the Act, the Notes shall
bear the legend provided in the Offering Memorandum.
The Notes are being offered in connection with certain transactions
including (i) the establishment pursuant to a new credit agreement (such
agreement, together with all documents
<PAGE>
-3-
executed in connection therewith, the "Credit Agreement") of a $135.0 million
----------------
senior term loan facility and a $140.0 million senior revolving credit facility
($40.0 million and $20.0 million of which will be exclusively reserved for use
in connection with a term loan and a revolving credit facility, respectively, of
Koppers Australia Pty. Limited ("Koppers Australia")) (the "New Credit
----------------- ----------
Facilities"); (ii) the acquisition of The Broken Hill Proprietary Company
- ----------
Limited's 50% interest in Koppers Australia (the "Koppers Australia
-----------------
Acquisition") pursuant to an Agreement for Sale of Shares, dated October 8,
- -----------
1997, by and among BHP Nominees No. 3 Pty. Ltd, The Broken Hill Proprietary
Company Limited, the Company, Koppers Australia, Continental Carbon Australia
Pty. Limited and KAP Investments, Inc. (together with all documents executed in
connection therewith, the "Koppers Australia Acquisition Documents"); (iii) an
---------------------------------------
offer (the "Tender Offer") to purchase, pursuant to certain conditions, the
------------
Company's outstanding 8 1/2% Senior Notes due February 1, 2004 (the "8 1/2s");
------
(iv) a related solicitation of consents pursuant to a consent solicitation (the
"Consent Solicitation") to modify certain terms of the indenture under which the
--------------------
8 1/2s were issued pursuant to a supplemental indenture (the "Supplemental
------------
Indenture"); (v) the repayment of outstanding indebtedness under the Company's
- ---------
existing term loan and revolving credit facilities (the "Repayment"); (vi) the
---------
redemption of 1,813,200 shares of non-voting Common Stock of the Company
("Common Stock") owned by APT Holdings Corporation, an affiliate of Mellon Bank,
- --------------
N.A., for $22.9 million (the "APT Redemption"); (vii) the redemption, at $17.00
--------------
per share, of up to 25% of the shares of Common Stock owned by the current
officers of the Company and Clayton A. Sweeney (a member of the Board of
Directors) and the redemption of up to 100% of the shares of Common Stock owned
by any other Management Investor (as defined in the Offering Memorandum) within
sixty (60) days of the consummation of the Offering and upon compliance with any
applicable securities laws, at the election of such individuals, in an aggregate
amount not exceeding $15.0 million (the "Management Investor Redemption"); and
------------------------------
(viii) the redemption of 436,508 non-voting shares of Common Stock from Saratoga
Koppers Funding, Inc. (the "Saratoga Koppers Redemption"). The Koppers
---------------------------
Australia Acquisition, the Tender Offer, the Consent Solicitation (including the
execution of the Supplemental Indenture), the Repayment, the Saratoga Koppers
Redemption and the establishment of and initial funding under the New Credit
Facilities (including the execution and delivery of the Credit Agreement) are
referred to herein collectively as the "Recapitalization Transaction." The APT
----------------------------
Redemption and the Management Investor Redemption are referred to herein
collectively as the "Other Transactions." The Offering, the Recapitalization
------------------
Transaction and the Other Transactions are
<PAGE>
-4-
referred to herein collectively as the "Transactions." The Credit Agreement,
------------
the Koppers Australia Acquisition Documents and the Supplemental Indenture are
referred to herein collectively as the "Recapitalization Documents." Documents
--------------------------
executed in connection with the Other Transactions are referred to herein
collectively as the "Other Documents." The Operative Documents, the
---------------
Recapitalization Documents and the Other Documents are referred to herein
collectively as the "Transaction Documents."
---------------------
The net proceeds from the Offering, together with borrowings under the New
Credit Facilities, will be used by the Company to effect the Transactions and to
pay related fees and expenses.
The Company, each of the Subsidiary Guarantors, and the Initial Purchaser
agree as follows:
1. SALE AND PURCHASE. Upon the basis of the representations, warranties
and covenants contained in this Agreement, and subject to the other terms and
conditions herein set forth, the Company agrees to issue and sell to the Initial
Purchaser, and the Initial Purchaser agrees to purchase from the Company, the
aggregate principal amount of the Notes. The purchase price for the Notes shall
be 97.25% of their principal amount. The Company shall cause each Subsidiary
Guarantor to unconditionally guarantee on a senior subordinated basis by such
Subsidiary Guarantor the Company's obligations under the Notes and the Exchange
Notes.
2. PAYMENT AND DELIVERY. Payment of the purchase price for the Notes
shall be made to the Company by wire transfer of immediately available funds, to
an account of the Company designated by the Company at least two business days
prior to the payment date, against delivery of the certificates for the Notes
for the account of the Initial Purchaser. Delivery of, and payment of the
purchase price for, the Notes shall be made at 9:00 a.m., New York City time, on
the third business day following the date of this Agreement (the "Closing Date")
------------
at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York
10005. The Closing Date, and the location of delivery of, and the form of
payment for, the Notes may be varied by mutual agreement between the Initial
Purchaser and the Company.
One or more of the Notes in global form or certificated form, as the case
may be, registered in such names as the Initial Purchaser may request upon at
least one business day's notice prior to the Closing Date, having an aggregate
principal amount corresponding to the aggregate principal amount of the Notes
sold
<PAGE>
-5-
pursuant to Exempt Resales to QIBs, in the case of the Notes in global form, and
to other Eligible Purchasers, in the case of Notes in certificated form sold
pursuant to Regulation S, shall be delivered by the Company to the Initial
Purchaser (or as the Initial Purchaser directs), against payment by the Initial
Purchaser of the purchase price therefor by means of transfer of immediately
available funds (including book transfer) reasonably acceptable to the Initial
Purchaser and the Company to the order of the Company. The Notes in global form
shall be made available to the Initial Purchaser for inspection not later than
9:30 a.m. on the business day immediately preceding the Closing Date.
3. AGREEMENTS OF THE ISSUERS. The Company and the Subsidiary Guarantors
covenant and agree with the Initial Purchaser as follows:
(a) To furnish the Initial Purchaser and those persons identified by
the Initial Purchaser, without charge, with as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchaser may reasonably
request for purposes contemplated by the Act. The Company consents to the
use of the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments and supplements thereto required pursuant to this Agreement,
by the Initial Purchaser in connection with Exempt Resales that are in
compliance with Section 4(B) of this Agreement.
(b) Not to amend or supplement the Offering Memorandum prior to the
Closing Date unless the Initial Purchaser shall previously have been
advised of, and shall not have objected to (any such objection not to be
unreasonable), such amendment or supplement within a reasonable time, but
in any event not longer than five days after being furnished with a copy of
such amendment or supplement. The Company shall promptly prepare, upon the
Initial Purchaser's reasonable request, any amendment or supplement to the
Offering Memorandum that may be necessary or advisable in connection with
Exempt Resales.
(c) If, during the time that an Offering Memorandum is required to be
delivered in connection with any Exempt Resales or market-making
transactions after the date of this Agreement and prior to the consummation
of the Exchange Offer, any event shall occur that, in the judgment of the
Company or any of the Subsidiary Guarantors or in the judgment of counsel
to the Initial Purchaser, makes any statement of a material fact in the
Offering Memorandum
<PAGE>
-6-
untrue or that requires the making of any additions to or changes in the
Offering Memorandum in order to make the statements in the Offering
Memorandum, in the light of the circumstances under which they are made,
not misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with all applicable laws, the Company and the
Subsidiary Guarantors shall promptly notify the Initial Purchaser of such
event and prepare an appropriate amendment or supplement to the Offering
Memorandum so that (i) the statements in the Offering Memorandum as amended
or supplemented will, in the light of the circumstances at the time that
the Offering Memorandum is delivered to prospective Eligible Purchasers,
not be misleading and (ii) the Offering Memorandum will comply with
applicable law.
(d) To furnish such information as may be required and otherwise to
cooperate with the Initial Purchaser and counsel to the Initial Purchaser
in qualifying the Notes and Exchange Notes for offering and sale under the
securities or Blue Sky laws of such jurisdictions as the Initial Purchaser
may request and to maintain such qualification in effect so long as
required for the Exempt Resales; provided that neither the Company nor any
Subsidiary Guarantor shall be required to qualify as a foreign corporation
in any jurisdiction in which it is not so qualified or to file a general
consent to service of process in any such jurisdiction or subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject (except service of process with respect to
the offering and sale of the Notes and Exchange Notes); and to promptly
advise the Initial Purchaser of the receipt by the Company or any of the
Subsidiary Guarantors of any notification with respect to the suspension of
the qualification of the Notes or Exchange Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.
(e) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement becomes effective or is terminated, to pay
all costs, expenses, fees, disbursements (including fees, expenses and
disbursements of counsel) and stamp, documentary or similar taxes imposed
by the U.S. incident to and in connection with: (i) the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum
and the Offering Memorandum (including, without limitation, financial
statements) and all amendments and supplements thereto, (ii) the
preparation and delivery of the Operative
<PAGE>
-7-
Documents and all other agreements, memoranda, correspondence and documents
prepared and delivered in connection with this Agreement and with the
Exempt Resales, (iii) the issuance, transfer and delivery by the Company
and the Subsidiary Guarantors of the Notes and the Subsidiary Guarantees,
respectively, to the Initial Purchaser, (iv) the qualification or
registration of the Notes for offer and sale under the securities or Blue
Sky laws of the several states (including, without limitation, the cost of
printing and mailing a preliminary and final Blue Sky memorandum and the
fees and disbursements of counsel to the Initial Purchaser relating
thereto), (v) the furnishing of such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Notes and Exchange
Notes (including, without limitation, printing and engraving thereof),
(vii) the application for eligibility of the Notes for trading in the
Private Offerings, Resales and Trading through Automated Linkages
("PORTAL") market of the National Association of Securities Dealers, Inc.
------
("NASD"), including, but not limited to, all application fees and expenses,
----
(viii) the approval of the Notes and Exchange Notes by The Depository Trust
Company ("DTC") for "book-entry" transfer, (ix) the rating of the Notes and
---
Exchange Notes by rating agencies, (x) the fees and expenses of the Trustee
and its counsel and (xi) the performance by the Company and the Subsidiary
Guarantors of their other obligations under the Operative Documents,
including, but not limited to, the fees, disbursements and expenses of the
Company's counsel and accountants.
(f) To use the proceeds from the sale of the Notes in the manner
described in the Offering Memorandum under the caption "Use of Proceeds."
(g) To do and perform all things required to be done and performed
under this Agreement by it prior to or after the Closing Date and to
satisfy all conditions precedent on its part to the delivery of the Notes.
(h) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Notes in a manner that would require the
registration under the Act of the sale of the Notes to the Initial
Purchaser or any Eligible Purchasers.
<PAGE>
-8-
(i) From and after the Closing Date, for so long as any of the Notes remain
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the Act and during any period in which the Company is not
subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available the information required by
------------
Rule 144A(d)(4) under the Act to (i) any holder or beneficial owner of
Notes in connection with any sale of such Notes and (ii) any prospective
purchaser of such Notes from any such holder or beneficial owner designated
by the holder or beneficial owner.
(j) To comply with all of its agreements set forth in the Registration
Rights Agreement and all agreements set forth in the representations letter
of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(k) To use its best efforts to effect the eligibility of the Notes for
trading in the PORTAL market and to obtain approval of the Notes by DTC for
"book-entry" transfer.
(l) From and after the Closing Date, for so long as any of the Notes
remain outstanding, to deliver without charge to the Initial Purchaser,
promptly upon their becoming available, copies of (i) all reports and other
communications (financial or otherwise) that the Company shall mail or
otherwise make available to its security holders, (ii) all reports or
financial statements furnished to or filed by the Company and each of the
Subsidiary Guarantors with the Commission or any national securities
exchange and (iii) such other information as the Initial Purchaser may
reasonably request regarding the Company and its subsidiaries.
(m) Prior to the Closing Date, to furnish to the Initial Purchaser, as
soon as they have been prepared by the Company and the Subsidiary
Guarantors, a copy of any regularly prepared internal financial statements
of the Company and each of the Subsidiary Guarantors for any period
subsequent to the period covered by the financial statements appearing in
the Offering Memorandum and prior to the Closing Date.
(n) Not to distribute prior to the Closing Date any offering material
in connection with the offer and sale of
<PAGE>
-9-
the Notes other than the Preliminary Offering Memorandum and the Offering
Memorandum.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SUBSIDIARY
GUARANTORS. (A) The Company and each of the Subsidiary Guarantors represents
and warrants to the Initial Purchaser that:
(1) Each of the Preliminary Offering Memorandum and the Offering
Memorandum has been prepared in connection with the Exempt Resales.
Neither the Preliminary Offering Memorandum nor the Offering Memorandum, or
any supplement or amendment thereto, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company and the
-------- -------
Subsidiary Guarantors make no representation or warranty with respect to
information contained in or omitted from the Preliminary Offering
Memorandum or the Offering Memorandum, as supplemented or amended, in
reliance upon and in conformity with information relating to the Initial
Purchaser furnished to the Company by the Initial Purchaser expressly for
use in the Preliminary Offering Memorandum or the Offering Memorandum or
any supplement or amendment thereto. No order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act has been issued or threatened.
(2) As of the date of this Agreement, the Company has the authorized,
issued and outstanding capitalization as set forth under the heading
entitled "Actual" in the section of the Offering Memorandum entitled
"Capitalization" and, as of the Closing Date, the Company shall have an
authorized capitalization as set forth under the heading entitled "As
Adjusted" in the section of the Offering Memorandum entitled
"Capitalization"; all of the outstanding capital stock of the Company has
been duly authorized and validly issued and is fully paid and nonassessable
and was not issued in violation of any preemptive or similar rights.
(3) Other than the C Class Shares of Koppers Australia, the Company
owns (other than with respect to Koppers Australia and its subsidiaries),
and as of the time of purchase will own (including with respect to Koppers
Australia and its subsidiaries), 100% of the outstanding capital stock and
other securities evidencing equity ownership of the Subsidiary Guarantors,
free and clear of
<PAGE>
-10-
any pledge, fiduciary transfer, security interest, claim, lien, limitation
on voting rights or encumbrance (other than, as of the Closing Date, the
liens imposed by the New Credit Facilities), and all such securities will
have been duly authorized and validly issued, fully paid and nonassessable
and will not have been issued in violation of, or subject to, any
preemptive or similar rights. There will not be any outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock or other equity interest of
any Subsidiary Guarantor.
(4) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its respective jurisdiction of incorporation and has all
requisite corporate power and authority to (a) carry on its business as it
is currently being conducted and as described in the Offering Memorandum
and (b) own, lease, license and operate its respective properties in
accordance with its business as currently conducted. The Company and each
of its subsidiaries is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified would not,
either individually or in the aggregate, result in a Material Adverse
Effect. A "Material Adverse Effect" means any material adverse effect on
-----------------------
the business, condition (financial or other), properties, assets,
liabilities, results of operations or prospects of the Company and its
subsidiaries taken as a whole.
(5) The Company and each of the Subsidiary Guarantors has all
requisite corporate power and authority to execute, deliver and perform all
of its obligations under the Transaction Documents and to consummate the
Transactions contemplated by the Transaction Documents and, without
limitation, the Company has all requisite corporate power and authority to
issue, sell and deliver the Notes and each of the Subsidiary Guarantors has
all requisite corporate power and authority to execute, deliver and perform
all of its obligations under the Subsidiary Guarantees.
(6) This Agreement has been duly and validly authorized, executed and
delivered by the Company and each of the Subsidiary Guarantors.
<PAGE>
-11-
(7) The Indenture has been duly and validly authorized by the Company
and each of the Subsidiary Guarantors and, when duly executed and delivered
by the Company and each of the Subsidiary Guarantors, will be a legal,
valid and binding agreement of each of the Company and the Subsidiary
Guarantors, enforceable against each of them in accordance with its terms,
except that enforceability of the Indenture may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity and the discretion of the court before which any proceedings
therefor may be brought. The Indenture, when executed and delivered, will
conform in all material respects to the description thereof in the Offering
Memorandum.
(8) The Notes have been duly and validly authorized for issuance and
sale to the Initial Purchaser by the Company and, when issued,
authenticated and delivered by the Company against payment by the Initial
Purchaser in accordance with the terms of this Agreement and the Indenture,
the Notes will be legal, valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, except that enforceability of the
Notes may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity and the discretion of the court before
which any proceedings therefor may be brought. The Notes, when issued,
authenticated and delivered, will conform in all material respects to the
description thereof in the Offering Memorandum.
(9) The Exchange Notes have been duly and validly authorized for
issuance by the Company and, when issued, authenticated and delivered by
the Company in accordance with the terms of the Exchange Offer and the
Indenture, the Exchange Notes will be legal, valid and binding obligations
of the Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with their terms, except that
enforceability of the Exchange Notes may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity and the discretion of the court before which any proceedings
therefor may be brought. The Exchange Notes, when issued, authenticated
and delivered, will conform in
<PAGE>
-12-
all material respects to the description thereof in the Offering
Memorandum.
(10) The Subsidiary Guarantees will be duly and validly authorized by
the Subsidiary Guarantors and, when the Notes and Exchange Notes are
executed and delivered in accordance with the terms of the Indenture and
the Registration Rights Agreement, will be legal, valid and binding
obligations of the Subsidiary Guarantors, enforceable against each of them
in accordance with their terms, except that enforceability of the
Subsidiary Guarantees may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought. The Subsidiary Guarantees, when executed and delivered, will
conform in all material respects to the description thereof in the Offering
Memorandum.
(11) The Registration Rights Agreement has been duly and validly
authorized by the Company and each of the Subsidiary Guarantors and, when
duly executed and delivered by the Company and each of the Subsidiary
Guarantors, will be a legal, valid and binding agreement of the Company and
each of the Subsidiary Guarantors, enforceable against each of them in
accordance with its terms, except that (a) enforceability of the
Registration Rights Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity and the
discretion of the court before which any proceedings therefor may be
brought and (b) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy consid
erations. The Registration Rights Agreement will conform in all material
respects to the description thereof in the Offering Memorandum.
(12) None of the Company or its subsidiaries is (A) in violation of
its charter, bylaws or other organizational document or (B) in default (or,
with notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any bond, debenture, note, indenture, mortgage, deed
of trust, loan agreement, lease, license, franchise agreement,
authorization, permit, certificate or other agreement or instrument to
which any of them is a party or by which any of them is bound or to which
any of
<PAGE>
-13-
their assets or properties is subject (collectively, "Agreements"), or (C)
----------
in violation of any law, statute, rule, regulation, judgment, order or
decree of any domestic or foreign court with jurisdiction over any of them
or any of their assets or properties or other governmental or regulatory
authority, agency or other body, that, in the case of clauses (B) and (C)
above, would, either individually or in the aggregate, result in a Material
Adverse Effect. There exists no condition that, with notice or lapse of
time or both, would constitute a default by the Company or any of its
subsidiaries under any such document or instrument or result in the
imposition of any penalty or the acceleration of any indebtedness, other
than penalties, defaults or conditions that would not, either individually
or in the aggregate, result in a Material Adverse Effect.
(13) Each of the Recapitalization Documents and the Other Documents
conforms in all material respects to the description thereof contained in
the Offering Memorandum.
(14) Each of the Recapitalization Documents and the Other Documents
have been duly and validly authorized, and when executed and delivered by
the Company and any subsidiary of the Company which may be a party thereto,
will constitute the legal, valid and binding obligations of the Company or
such subsidiary enforceable against the Company or such subsidiary in
accordance with their terms, except that enforceability of the
Recapitalization Documents and the Other Documents may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforceability of creditors' rights generally and by general
principles of equity and the discretion of the court before which any
proceedings therefor may be brought.
(15) The execution, delivery or performance by the Company and its
subsidiaries (as applicable) of this Agreement and each of the other
Transaction Documents to which they are a party does not or will not
violate, conflict with or constitute a breach of any of the terms or
provisions of, or a default under (or an event that with notice or the
lapse of time, or both, would constitute a default), or require consent
under (as of the Closing Date), or result in the creation or imposition of
a lien, charge or encumbrance on any property or assets of the Company or
any of its subsidiaries other than, as of the Closing Date, the liens
imposed by the New Credit Facilities, pursuant to, (i) the charter, bylaws
or other organizational documents of the
<PAGE>
-14-
Company or any of its subsidiaries, (ii) after giving effect to the Consent
Solicitation, any bond, debenture, note, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of the
its subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, (iii) any law, statute, rule
or regulation applicable to the Company or any of its subsidiaries or their
assets or properties or (iv) any judgment, order or decree of any domestic
or foreign court or governmental agency or authority having jurisdiction
over the Company or any of its subsidiaries or their assets or properties.
Assuming the accuracy of the representations and warranties of the Initial
Purchaser in Section 4(B) of this Agreement, no consent, approval,
authorization or order of, or filing, registration, qualification, license
or permit of or with, any court or governmental agency, body or
administrative agency, domestic or foreign, is required to be obtained or
made by the Company for the execution, delivery and performance of this
Agreement or any of the other Operative Documents, the execution, delivery
and performance of the other Transaction Documents or any of the
transactions contemplated thereby, except (i) such as have been or will be
obtained or made prior to Closing, (ii) registration of the Notes under the
Act pursuant to the Registration Rights Agreement or (iii) such as may be
required by the NASD. No consents or waivers from any other person or
entity are required for the execution, delivery and performance of this
Agreement or any of the other Operative Documents, the execution, delivery
and performance of the other Transaction Documents or any of the
transactions contemplated thereby, except such as have been or will be
obtained or made prior to closing.
(16) The representations and warranties of each of the Company and any
of its subsidiaries party thereto set forth in the Credit Agreement will be
true and correct as of the Closing Date (except to the extent that any such
representation or warranty was expressly made as of any other date, in
which case such representation and warranty was true and correct as of such
date).
(17) There is (i) except as set forth in the Offering Memorandum, no
action, suit or proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending or,
to the knowledge of the Company or its subsidiaries, threatened or
contemplated, to
<PAGE>
-15-
which the Company or any of its subsidiaries is or may be a party or to
which the business, assets or property of such person is or may be subject,
(ii) except as set forth in the Offering Memorandum, no statute, rule,
regulation or order that has been enacted, adopted or issued or, to the
knowledge of the Company or its subsidiaries, that has been proposed by any
governmental body or agency, domestic or foreign, (iii) no injunction,
restraining order or order of any nature by a federal or state court or
foreign court of competent jurisdiction to which the Company or any of its
subsidiaries is or may be subject that (x) in the case of clause (i) above,
if determined adversely to the Company or its subsidiaries, would be
reasonably likely to, either individually or in the aggregate, (1) result
in a Material Adverse Effect, or (2) interfere with or adversely affect the
issuance of the Notes or the Exchange Notes or the Subsidiary Guarantees in
any jurisdiction or adversely affect the consummation of the transactions
contemplated by any of the Transaction Documents, and (y) in the case of
clauses (ii) and (iii) above, would, either individually or in the
aggregate, (1) result in a Material Adverse Effect, or (2) interfere with
or adversely affect the issuance of the Notes or the Exchange Notes or the
Subsidiary Guarantees in any jurisdiction or adversely affect the
consummation of the transactions contemplated by any of the Transaction
Documents. Every request of any securities authority or agency of any
jurisdiction for additional information with respect to Notes or the
Exchange Notes that has been received by the Company, the Subsidiary
Guarantors or their counsel prior to the date hereof has been, or will
prior to the Closing Date be, complied with.
(18) No labor disturbance by the employees of the Company or any of
its subsidiaries exists or, to the actual knowledge of the Company or the
Subsidiary Guarantors, is imminent that might reasonably be expected to
result in a Material Adverse Effect; the Company and its subsidiaries are
in compliance in all respects with, as applicable and except where a
failure to so comply would not have a Material Adverse Effect, all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no unwaivable "reportable event" (as
-----
defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company or its subsidiaries would have any
liability; none of the Company or its subsidiaries has incurred or expects
to incur liability under (i) Title IV of
<PAGE>
-16-
ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Sections 412, 4971 or 4975 of the Internal Revenue Code of
1986, as amended, including the regulations and published interpretations
thereunder (the "Code"); and each "pension plan" that is maintained or
----
contributed to by the Company or its subsidiaries that is intended to be
qualified under Section 401(a) of the Code is so qualified and nothing has
occurred, whether by action or by failure to act, that would cause the loss
of such qualification.
(19) Except as set forth in the Offering Memorandum, the Company and
each of its subsidiaries (i) is in compliance with, and not subject to
costs or liabilities under, any and all local, state, provincial, federal
and foreign laws, regulations, rules of common law, orders and decrees, as
in effect as of the date hereof, and any presently effective judgments,
decrees, orders and injunctions issued or promulgated thereunder, in each
case, relating to pollution or protection of public and employee health and
safety and the environment applicable to it or its business or operations
or ownership or use of its property ("Environmental Laws"), other than such
------------------
noncompliance or costs or liabilities that would not, either individually
or in the aggregate, result in a Material Adverse Effect, and (ii)
possesses all permits, licenses or other approvals required under
applicable Environmental Laws and all such permits, licenses and other
approvals to expire within the next five years shall be renewed or
otherwise extended or reissued in due course, and no new permit
requirements shall become effective, in each case, other than such permits,
licenses or approvals the lack of which would not, either individually or
in the aggregate, result in a Material Adverse Effect. All currently
pending and, to their knowledge, threatened proceedings, notices of
violation, demands, notices of potential responsibility or liability, suits
and existing environmental conditions with respect to which the Company or
its subsidiaries could reasonably be expected to have any liability are
fully and accurately described in all material respects in the Offering
Memorandum except as would not, either individually or in the aggregate,
result in a Material Adverse Effect. Each of the Company and its
subsidiaries maintains a system of internal environmental management
controls sufficient to provide reasonable assurance that all material
sampling, analytical, recordkeeping and reporting requirements under
applicable Environmental Laws are implemented, executed and
<PAGE>
-17-
maintained in accordance with the requirements of such Environmental Laws.
(20) The Company and each of its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it and good and marketable title to the
leasehold estates in the real and personal property described in the
Offering Memorandum as leased by it, free and clear of all Liens (as
defined in the Indenture), except for Liens described in the Offering
Memorandum, Liens permitted under the Indenture and such Liens as would
not, either individually or in the aggregate, result in a Material Adverse
Effect, (ii) all licenses, certificates, permits, authorizations,
approvals, franchises and other rights from, and has made all declarations
and filings with, all federal, state, local and foreign authorities, all
self-regulatory authorities and all courts and other tribunals (each, an
"Authorization") to (a) carry on its business as it is currently being
--------------
conducted and as described in the Offering Memorandum and (b) own, lease,
license and operate its respective properties in accordance with its
business as currently conducted, and (iii) no reason to believe that any
governmental body or agency, domestic or foreign, is considering limiting,
suspending or revoking any such Authorization. Except where the failure to
be in full force and effect and in compliance would not, either
individually or in the aggregate, result in a Material Adverse Effect, all
such Authorizations are valid and in full force and effect and the Company
and each of its subsidiaries is in compliance with the terms and conditions
of all such Authorizations and with the rules and regulations of the
regulatory authorities having jurisdiction with respect to such
Authorizations. All leases to which the Company or any of its subsidiaries
is a party are valid and binding, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity and the discretion of the court before which
any proceedings therefor may be brought and no default has occurred and is
continuing thereunder, other than defaults that would not, either
individually or in the aggregate, result in a Material Adverse Effect.
(21) The Company and each of its subsidiaries owns, possesses or has
the right to employ all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
<PAGE>
-18-
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively, the
"Intellectual Property") necessary to conduct the businesses operated by it
----------------------
as described in the Offering Memorandum. None of the Company or the
Subsidiary Guarantors has received any notice of infringement of or
conflict with (and neither knows of any such infringement or a conflict
with) asserted rights of others with respect to any of the foregoing that,
if such assertion of infringement or conflict were sustained, would result
in a Material Adverse Effect. The use of the Intellectual Property in
connection with the business and operations of the Company and its
subsidiaries does not infringe on the rights of any person.
(22) All tax returns required to be filed by the Company and each of
its subsidiaries have been filed in all jurisdictions where such returns
are required to be filed; and all taxes, including withholding taxes,
penalties and interest, assessments, fees and other charges due or claimed
to be due from such entities or that are due and payable have been paid,
other than those being contested in good faith and for which reserves have
been provided in accordance with generally accepted accounting principles
or those currently payable without penalty or interest. To the knowledge
of the Company and each of the Subsidiary Guarantors, there are no material
proposed additional tax assessments against any of them or their
subsidiaries or their assets or property.
(23) None of the Company or its subsidiaries is an "in vestment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended (the "Investment
----------
Company Act"), or analogous foreign laws and regulations.
-----------
(24) Except with respect to the Notes or the Exchange Notes and except
with respect to Common Stock owned by Saratoga Partners III, L.P., there
are no holders of securities of the Company or any of its subsidiaries who
have the right to request or demand that the Company or any of its
subsidiaries register under the Act or analogous foreign laws and
regulations any of such securities held by any such holders.
(25) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are
<PAGE>
-19-
executed in accordance with management's general or specific
authorizations; (B) transactions are recorded as necessary to permit
preparation of its financial statements in conformity with United States
generally accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for its assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(26) The Company and each of its subsidiaries maintains insurance
covering its properties, assets, operations, personnel and businesses, and
such insurance is of such type and in such amounts in accordance with
customary industry practice to protect the Company and its subsidiaries and
their businesses. None of the Company or the Subsidiary Guarantors has
received notice from any insurer or agent of such insurer that any material
capital improvements or other material expenditures will have to be made in
order to continue any insurance maintained by any of them other than
capital improvements and other expenditures that have been budgeted by the
Company or its subsidiaries, as the case may be.
(27) None of the Company, the Subsidiary Guarantors or their
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
(A) taken, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of any security of the Company or any of the Subsidiary
Guarantors to facilitate the sale or resale of the Notes or (B) since the
date of the Preliminary Offering Memorandum (x) sold, bid for, purchased or
paid any person any compensation for soliciting purchases of the Notes in a
manner that would require registration of the Notes under the Act or (y)
paid or agreed to pay to any person any compensation for soliciting another
to purchase any other securities of the Company or any of the Subsidiary
Guarantors in a manner that would require registration of the Notes under
the Act.
(28) No registration under the Act of the Notes is re quired for the
sale of the Notes to the Initial Purchaser as contemplated by this
Agreement or for the Exempt Resales, assuming in each case that (A) the
purchasers who buy the Notes in the Exempt Resales are Eligible Purchasers
and (B) the accuracy of and compliance with the Initial
<PAGE>
-20-
Purchaser's representations, warranties and covenants contained in Section
4(B) of this Agreement. No form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) was
used by the Company, any of the Subsidiary Guarantors or any of their
representatives in connection with the offer and sale of any of the Notes
or in connection with Exempt Resales, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(29) The execution and delivery of this Agreement, the other Operative
Documents and the sale of the Notes, the Exchange Notes, and Subsidiary
Guarantees to be purchased by the Eligible Purchasers will not involve any
prohibited transaction within the meaning of Section 406(a) of ERISA or
Section 4975(c)(1)(A)-(D) of the Code. The representation made by the
Company and each of the Subsidiary Guarantors in the preceding sentence is
made in reliance upon and subject to the accuracy of, and compliance with,
the representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Memorandum under the caption
"Transfer Restrictions."
(30) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as of
its date, contains the information specified in, and meets the requirements
of, Rule 144A(d)(4) under the Act.
(31) Since the date as of which information is given in the Offering
Memorandum, except as otherwise expressly set forth therein, neither the
Company nor any of its subsidiaries had any material liabilities or
obligations, direct or contingent, that were not set forth in the Company's
consolidated balance sheet as of September 30, 1997, or in the notes
thereto. Since the date as of which information is given in the Offering
Memorandum and up to the Closing Date, except as otherwise expressly set
forth in the Offering Memorandum, (a) none of the Company or its
subsidiaries has (1) incurred any liabilities or obligations, direct or
contingent, that are not in the ordinary course of business that would,
either individually or in the aggregate, result in a Material Adverse
Effect or (2) entered into any material transaction not in the ordinary
course of business, (b) there has not been any
<PAGE>
-21-
event or development in respect of the business, development or financial
condition of the Company or any of its subsidiaries that would, either
individually or in the aggregate, result in a Material Adverse Effect, (c)
there has been no dividend or distribution of any kind declared, paid, or
made by either the Company or any of its subsidiaries on any class of its
capital stock, and (d) there has not been any change in the long-term debt
of the Company and its subsidiaries.
(32) Neither the Company nor any of its subsidiaries (nor any agent
acting on behalf of the Company or any of the Subsidiary Guarantors) has
taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Notes or Exchange Notes to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of
the Board of Governors of the Federal Reserve System or analogous foreign
laws and regulations, in each case as in effect, or as the same may
hereafter be in effect, on the Closing Date.
(33) The accountants who have certified the financial statements
included as part of the Offering Memorandum are independent accountants
within the meaning of the Act. The historical financial statements of the
Company comply as to form in all material respects with the requirements
applicable to registration statements on Form S-1 under the Act and present
fairly in all material respects the consolidated financial position and
results of operations of the Company at the respective dates and for the
respective periods indicated. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis throughout the periods presented (except as
disclosed in the Offering Memorandum) and comply as to form with the rules
and regulations promulgated under the Act. The historical financial
statements of Koppers Australia present fairly in all material respects the
consolidated financial position and results of operations of Koppers
Australia at the respective dates and for the respective periods indicated.
Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent
basis throughout the periods presented (except as disclosed in the Offering
Memorandum) and comply as to form with the rules and regulations
promulgated under the Act. The pro forma financial statements included in
--- -----
the Offering Memorandum (i) have been
<PAGE>
-22-
prepared on a basis consistent with such historical statements, except for
the pro forma adjustments specified therein, (ii) include all material
--- -----
adjustments to the historical financial statements required by Rule 11-02
of Regulation S-X under the Exchange Act to reflect the transactions
described in the Offering Memorandum and (iii) give effect to assumptions
made on a reasonable basis and present fairly in all material respects the
historical and proposed transactions contemplated by the Offering
Memorandum, this Agreement, the Operative Documents and the other
Transaction Documents. All other financial and statistical information and
data included in the Offering Memorandum (including, but not limited to,
financial and statistical information contained in the Offering Memorandum
under the headings "Offering Memorandum Summary -- Summary Historical and
Pro Forma Consolidated Financial Information," "Capitalization," "Selected
Historical Consolidated Financial Information" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations"), historical
and pro forma, are accurately presented in all material respects and
--- -----
prepared on a basis consistent with the financial statements and the books
and records of the Company and its subsidiaries.
(34) None of the Company or the Subsidiary Guarantors is or, upon
consummation of the Transactions, will be (A) "insolvent" as that term is
defined in Section 101(32) of the United States Bankruptcy Code (the
"Bankruptcy Code") (11 U.S.C. (S) 101(32)), Section 2 of the Uniform
----------------
Fraudulent Transfer Act ("UFTA") or Section 2 of the Uniform Fraudulent
----
Conveyance Act ("UFCA"), (B) an entity with "unreasonably small capital" as
----
that term is used in Section 548(a)(2)(ii) of the Bankruptcy Code or
Section 5 of the UFCA, (C) engaged or about to engage in a business or
transaction for which its remaining property is "unreasonably small" in
relation to the business or transaction as that term is used in Section 4
of the UFTA or (D) unable to pay its debts as they mature or become due,
within the meaning of Section 548(a)(2)(B)(iii) of the Bankruptcy Code,
Section 4 of the UFTA and Section 6 of the UFCA. The Company and each of
the Subsidiary Guarantors now owns and upon consummation of the
Transactions will own assets having a value both at "fair valuation" and at
"present fair saleable value" greater than the amount required to pay its
"debts" as such terms are used in Section 2 of the UFTA and Section 2 of
the UFCA.
(35) Koppers Australia is not insolvent (within the meaning of section
95A of the Australian Corporations Law)
<PAGE>
-23-
as at the date of this Agreement and there are reasonable grounds to expect
that immediately following consummation of the transactions contemplated by
this Agreement, and each other Transaction Document to which Koppers
Australia is a party, Koppers Australia will not become insolvent.
(36) Except as described in the section entitled "Certain
Relationships and Related Transactions" in the Offering Memorandum, there
are no contracts, agreements or understandings between the Company or any
of the Subsidiary Guarantors and any other person other than the Initial
Purchaser that would give rise to a valid claim against the Company, the
Subsidiary Guarantors or the Initial Purchaser for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase and
sale of the Notes or Exchange Notes.
(37) The statistical and market-related data included in the Offering
Memorandum are based on or derived from sources that the Company and the
Subsidiary Guarantors believe to be reliable and accurate and represent the
Company's and the Subsidiary Guarantors' good faith estimates that are made
on the basis of data derived from such sources.
(38) No forward-looking statement (within the meaning of Section 27A
of the Act and Section 21E of the Exchange Act) contained in the Offering
Memorandum has been made or reaffirmed without a reasonable basis or has
been disclosed other than in good faith.
(39) There are no securities of the Company or any of the Subsidiary
Guarantors registered under the Exchange Act, or listed on a national
securities exchange or quoted in a U.S. automated interdealer quotation
system, other than the 8 1/2s.
(40) The Company shall cause Koppers Australia and each of the
Australian Subsidiary Guarantors to sign this Agreement on or before the
Closing Date.
(41) Each certificate signed by any officer of the Company or any of
the Subsidiary Guarantors and delivered to the Initial Purchaser or counsel
for the Initial Purchaser pursuant to, or in connection with, this
Agreement shall be deemed to be a representation and warranty by the
Company or such Subsidiary Guarantor to the Initial Purchaser as to the
matters covered by such certificate.
<PAGE>
-24-
The Company and each of the Subsidiary Guarantors acknowledges that
the Initial Purchaser and, for purposes of the opinions to be delivered to the
Initial Purchaser pursuant to Section 7 of this Agreement, the various law firms
acting as counsel to the Company and each of the Subsidiary Guarantors and
counsel to the Initial Purchaser will rely upon the accuracy and truth of the
foregoing representations and the Company and each Subsidiary Guarantor hereby
consents to such reliance.
(B) The Initial Purchaser represents, warrants and covenants to the
Company that it is a QIB with such knowledge and experience in financial and
business matters as are necessary in order to evaluate the merits and risks of
an investment in the securities. The Initial Purchaser represents, warrants and
agrees with the Company that (i) it has not and will not solicit offers for, or
offer or sell, the Notes by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or in any
manner involving a public offering within the meaning of Section 4(2) of the Act
and (ii) it has and will solicit offers for the Notes only from, and will offer
the Notes only to, (x) persons whom the Initial Purchaser reasonably believes to
be QIBs or, if any such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a QIB to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, and, in each case, in transactions under Rule 144A, or (y) persons
other than U.S. persons outside the U.S. in reliance on Regulation S.
The Initial Purchaser represents and warrants that the source of funds
being used by it to acquire the Notes does not include the assets of any
"employee benefit plan" (within the meaning of Section 3 of ERISA) or any "plan"
(within the meaning of Section 4975 of the Code).
The Initial Purchaser understands that the Company and, for purposes
of the opinion to be delivered to them pursuant to Section 7(f) hereof, counsel
to the Company will rely upon the accuracy and truth of the foregoing
representations, and the Initial Purchaser hereby consents to such reliance.
5. INDEMNIFICATION. (a) Each of the Company and the Subsidiary
Guarantors, on a joint and several basis, agrees to indemnify and hold harmless
the Initial Purchaser, each person, if any, who controls the Initial Purchaser
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
the agents, employees, officers and directors of the Initial
<PAGE>
-25-
Purchaser and the agents, employees, officers and directors of any such
controlling person from and against any and all losses, liabilities, claims,
damages and expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all reasonable expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all reasonable amounts paid in
settlement of any claim or litigation) to which they or any of them may become
subject under the Act, the Exchange Act or otherwise insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company and the Subsidiary Guarantors will not be
- -------- -------
liable in any such case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to the Initial Purchaser furnished to the Company by the
Initial Purchaser expressly for use therein. This indemnity agreement will be
in addition to any liability that each of the Company and the Subsidiary
Guarantors may otherwise have, including, but not limited to, liability under
this Agreement.
If any action is brought against the Initial Purchaser or any such
person in respect of which indemnity may be sought against the Company and the
Subsidiary Guarantors pursuant to the foregoing paragraph, the Initial Purchaser
or such person shall promptly notify the indemnifying party in writing of the
institution of such action and the indemnifying party shall assume the defense
of such action, including the employment of counsel reasonably satisfactory to
such indemnified party and payment of all fees and expenses, provided, however,
that the omission to so notify the indemnifying party shall not relieve the
indemnifying party from any liability which they may have to the Initial
Purchaser or any such person or otherwise. The Initial Purchaser shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Initial Purchaser unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action
<PAGE>
-26-
or the indemnifying party shall not have employed counsel to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them which
are different from or additional to those available to the indemnifying party
(in which case the indemnifying party shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying party and
paid as incurred (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel (together
with appropriate local counsel) in any one action or series of related actions
in the same jurisdiction representing the indemnified parties who are parties to
such action). The indemnifying party shall not be liable for any settlement of
any such claim or action effected without its written consent but if settled
with the written consent of the indemnifying party, the indemnifying party
agrees to indemnify and hold harmless the Initial Purchaser and any such person
from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of this
paragraph, then the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such request prior
to the date of such settlement and (iii) such indemnified party shall have given
the indemnifying party at least 30 days' prior notice of its intention to
settle. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company and the Subsidiary Guarantors, each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, and each of its agents, employees, officers and directors and the
agents, employees, officers and directors of such controlling person from and
against any losses, liabilities, claims, damages and expenses
<PAGE>
-27-
whatsoever (including but not limited to reasonable attorneys' fees and any and
all reasonable expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever and any and all reasonable amounts paid in settlement of any claim or
litigation) to which they or either of them may become subject under the Act,
the Exchange Act or otherwise insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum, or
in any amendment thereof or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that any such loss, liability, claim, damage
or expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information relating to the Initial Purchaser furnished
to the Company by the Initial Purchaser in writing expressly for use therein.
The Company and the Initial Purchaser acknowledge that the information set forth
in Section 8 is the only information furnished in writing by the Initial
Purchaser to the Company expressly for use in the Offering Memorandum.
If any action is brought against the Company or the Subsidiary
Guarantors or any such person in respect of which indemnity may be sought
against the Initial Purchaser pursuant to the foregoing paragraph, the Company,
the Subsidiary Guarantors or such person shall promptly notify the Initial
Purchaser in writing of the institution of such action and the Initial Purchaser
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses, provided, however, that the omission to so notify the Initial
Purchaser shall not relieve the Initial Purchaser from any liability which they
may have to the Company, the Subsidiary Guarantors or any such person or
otherwise. The Company, the Subsidiary Guarantors or such person shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of the Company or such person unless the
employment of such counsel shall have been authorized in writing by the Initial
Purchaser in connection with the defense of such action or the Initial Purchaser
shall not have employed counsel to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be
<PAGE>
-28-
defenses available to it or them which are different from or additional to those
available to the Initial Purchaser (in which case the Initial Purchaser shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties, but the Initial Purchaser may employ counsel and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of the Initial Purchaser), in any of which events such
fees and expenses shall be borne by the Initial Purchaser and paid as incurred
(it being understood, however, that the Initial Purchaser shall not be liable
for the expenses of more than one separate counsel in any one action or series
of related actions in the same jurisdiction representing the indemnified parties
who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, the Initial Purchaser shall not be liable for any settlement of
any such claim or action effected without the written consent of the Initial
Purchaser but if settled with the written consent of the Initial Purchaser, the
Initial Purchaser agrees to indemnify and hold harmless the Company, the
Subsidiary Guarantors and any such person from and against any loss or liability
by reason of such settlement. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second sentence of this paragraph, then the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 business
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and (iii) such
indemnified party shall have given the indemnifying party at least 30 days'
prior notice of its intention to settle. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
6. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 5 of this
Agreement is for any reason held to be unavailable from the indemnifying party,
or is insufficient to hold harmless a party indemnified under Section 5 of this
Agreement, the Company, the Subsidiary Guarantors and the
<PAGE>
-29-
Initial Purchaser shall contribute to the amount paid or payable by such
indemnified party as a result of such aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action or any claims
asserted) to which the Company and/or the Subsidiary Guarantors and the Initial
Purchaser may be subject (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Subsidiary Guarantors, on the
one hand, and the Initial Purchaser, on the other hand, from the Offering or,
(ii) if such allocation is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Subsidiary
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Subsidiary Guarantors, on the one hand, and the Initial Purchaser, on the other
hand, shall be deemed to be in the same proportion as (x) the total proceeds
from the Offering (net of discounts and commissions but before deducting
expenses) received by the Company and the Subsidiary Guarantors and (y) the
total discounts and commissions received by the Initial Purchaser as set forth
in the table on the cover page of the Offering Memorandum. The relative fault
of the Company and the Subsidiary Guarantors, on the one hand, and the Initial
Purchaser, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company (and the Subsidiary Guarantors) or the Initial Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission or alleged
statement or omission.
The Company, the Subsidiary Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this Section
6 were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 6, (i) in no case shall the
Initial Purchaser be required to contribute any amount in excess of the amount
by which the total discount and commissions applicable to the Notes and Exchange
Notes pursuant to this Agreement exceeds the amount of any damages that the
<PAGE>
-30-
Initial Purchaser have otherwise been required to pay by reason of any untrue or
alleged untrue statement or omission or alleged omission and (ii) no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 6, each person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same rights to
contribution as the Initial Purchaser, and each person, if any, who controls the
Company or the Subsidiary Guarantors within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Company or the Subsidiary Guarantors, respectively, where applicable,
subject in each case to clauses (i) and (ii) of this paragraph. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim for contribution
may be made against another party or parties under this Section 6, notify such
party or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 6 or otherwise; provided, however, that no additional notice shall be
-------- -------
required with respect to any action for which notice has been given under
Section 5 for purposes of indemnification. No party shall be liable for
contribution with respect to any action or claim settled without its written
consent, provided, however, that such written consent was not unreasonably
-------- -------
withheld.
7. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The obligations
of the Initial Purchaser to purchase and pay for the Notes, as provided for in
this Agreement, shall be subject to satisfaction of the following conditions
prior to or concurrently with such purchase:
(a) All of the representations and warranties of the Company and the
Subsidiary Guarantors contained in this Agreement shall be true and correct
on the date of this Agreement and on the Closing Date. The Company and the
Subsidiary Guarantors shall have performed or complied with all of the
agreements contained in this Agreement and required to be performed or
complied with by them at or prior to the Closing Date.
(b) No stop order suspending the qualification or exemption from
qualification of the Notes in any jurisdiction shall have been issued and
no proceeding for
<PAGE>
-31-
that purpose shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental
agency that would, as of the Closing Date, prevent the issuance of the
Notes or the Exchange Offer; no action, suit or proceeding shall have been
commenced and be pending against or affecting or, to the best knowledge of
the Company and the Subsidiary Guarantors, threatened against the Company
and/or the Subsidiary Guarantors before any court or arbitrator or any
governmental body, agency or official that, if adversely determined, would
result in a Material Adverse Effect.
(d) Since the date as of which information is given in the Offering
Memorandum, except as expressly set forth therein, neither the Company nor
any of its subsidiaries had any material liabilities or obligations, direct
or contingent, that were not set forth in the Company's consolidated
balance sheet as of September 30, 1997 or in the notes thereto. Since the
date as of which information is given in the Offering Memorandum and up to
the Closing Date, except as otherwise expressly set forth in the Offering
Memorandum, (a) none of the Company or its subsid iaries has (1) incurred
any liabilities or obligations, direct or contingent, that would, either
individually or in the aggregate, result in a Material Adverse Effect or
(2) entered into any material transaction not in the ordinary course of
business, and (b) there has not been any event or development in respect of
the business, development or financial condition of the Company or any of
its subsidiaries that would, either individually or in the aggregate,
result in a Material Adverse Effect.
(e) The Initial Purchaser shall have received certificates, dated the
Closing Date, signed by (i) the Chief Executive Officer and (ii) the chief
financial or accounting officer of the Company confirming, as of the
Closing Date, the matters set forth in paragraphs (a), (b), (c) and (d) of
this Section 7.
(f) The Initial Purchaser shall have received on the Closing Date an
opinion dated the Closing Date, addressed to the Initial Purchaser, of
Dickie, McCamey, & Chilcote, P.C., counsel to the Company, in form and
substance as set forth in Exhibit B hereto.
<PAGE>
-32-
(g) The Initial Purchaser shall have received on the Closing Date
opinions, dated the Closing Date, addressed to the Initial Purchaser, of
Baker & McKenzie and Allen Allen & Hemsley, counsel to Koppers Australia,
in form and substance reasonably satisfactory to the Initial Purchaser and
counsel for the Initial Purchaser.
(h) The Initial Purchaser shall have received on the Closing Date an
opinion (satisfactory in form and substance to the Initial Purchaser) dated
the Closing Date of Cahill Gordon & Reindel, special counsel to the Initial
Purchaser, covering substantially such matters as are customarily covered
in such opinions.
(i) The Initial Purchaser shall have received a "comfort letter" from
Ernst & Young LLP, independent public accountants for the Company and the
Subsidiary Guarantors, dated as of the date of this Agreement, addressed to
the Initial Purchaser and in form and substance satisfactory to the Initial
Purchaser and counsel to the Initial Purchaser. In addition, as of the
Closing Date, the Initial Purchaser shall have received a "bring-down
comfort letter" from Ernst & Young LLP in form and substance satisfactory
to the Initial Purchaser and counsel to the Initial Purchaser covering the
same items and matters as covered in the "comfort letter" but as of a date
that is not more than three days prior to the date thereof and any changes
and additions to the Preliminary Offering Memorandum that were made
producing the Offering Memorandum.
(j) The Company, the Subsidiary Guarantors and the Trustee shall have
entered into the Indenture and the Initial Purchaser shall have received
counterparts, conformed as executed, thereof.
(k) The Company and the Subsidiary Guarantors shall have entered into
the Registration Rights Agreement and the Initial Purchaser shall have
received counterparts, conformed as executed, thereof.
(l) The Company shall have executed the Recapitalization Documents,
which shall be in form and substance satisfactory to the Initial Purchaser
and counsel to the Initial Purchaser; and the Initial Purchaser shall have
received counterparts, conformed as executed thereof. The Company shall
have consummated the Recapitalization Transactions in accordance therewith.
<PAGE>
-33-
(m) The Company shall have executed the Other Documents, which shall
be in form and substance satisfactory to the Initial Purchaser and counsel
to the Initial Purchaser; and the Initial Purchaser shall have received
counterparts, conformed as executed thereof. The Company shall have
consummated that portion of the APT Redemption to be consummated on the
Closing Date in accordance therewith.
(n) The Notes shall have been approved as eligible for trading in the
PORTAL market.
(o) Between the time of execution of this Agreement and the time of
purchase of the Notes, there shall not have occurred any downgrading, nor
shall any notice have been given of (i) any intended or potential
downgrading or (ii) any review or possible change that does not indicate an
improvement, in the rating accorded any securities of or guaranteed by the
Company or any subsidiary of the Company by any "nationally recognized
statistical rating organization", as that term is defined in Rule 436(g)(2)
under the Act.
(p) The Initial Purchaser shall have been furnished with certified
copies of such documents as they may reasonably request, including, but not
limited to, certified copies of the Transaction Documents, and all closing
documents from the closings of the transactions contemplated hereby.
(q) Cahill Gordon & Reindel, counsel to the Initial Purchaser, shall
have been furnished with such documents as they may reasonably request to
enable them to review or pass upon the matters referred to in this Section
7 and in order to evidence the accuracy, completeness or satisfaction in
all material respects of any of the representations, warranties or
conditions contained in this Agreement.
(r) The Initial Purchaser shall have received on or before the Closing
Date an opinion (satisfactory in form and substance to the Initial
Purchaser and its counsel) dated the Closing Date, addressed to the Initial
Purchaser, of Houlihan, Lokey, Howard & Zukin supporting the conclusion
that, after giving effect to the Transactions, each of the Company and
Koppers Australia will not be insolvent.
If any of the conditions specified in this Section 7 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by
<PAGE>
-34-
the Initial Purchaser on notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party except that the Company shall reimburse the Initial Purchaser
for all of the reasonable out-of-pocket expenses, including the reasonable
expense of Initial Purchaser's counsel, incurred by the Initial Purchaser in
connection with this Agreement. Notwithstanding any such termination, the
provisions of Sections 3(e), 5, 6, 9, 10(d) and 13 shall remain in effect.
The Company's obligation under this Agreement to sell the Notes to the
Initial Purchaser on the Closing Date is subject to the Initial Purchaser
purchasing and paying for all of the Notes.
8. INITIAL PURCHASER'S INFORMATION. The Company and the Initial
Purchaser severally acknowledge that the statements set forth in (i) the last
paragraph on the front cover page con cerning the forms of the offering by the
Initial Purchaser; (ii) the first paragraph on page 3 concerning stabilization
activities by the Initial Purchaser; and (iii) the statements concerning the
Initial Purchaser contained in the fifth paragraph under the caption "Plan of
Distribution" in the Offering Memorandum constitute the only information
furnished in writing by the Initial Purchaser expressly for use in the Offering
Memorandum.
9. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations
and warranties, covenants and agreements contained in this Agreement, including
the agreements contained in Sections 3(e) and 10(d), the indemnity agreements
contained in Section 5 and the contribution agreements contained in Section 6
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Initial Purchaser or any controlling
person thereof or by or on behalf of the Company, any of the Subsidiary
Guarantors or any controlling person of any thereof, and shall survive delivery
of and payment for the Notes to and by the Initial Purchaser. The
representations contained in Section 4 and the agreements contained in Sections
3(e), 5, 6, 10(d) and 13 shall survive the termination of this Agreement,
including pursuant to Sections 7 and 10.
10. EFFECTIVE DATE OF AGREEMENT; TERMINATION. (a) This Agreement
shall become effective upon execution and delivery of a counterpart hereof by
each of the parties hereto.
(b) The Initial Purchaser shall have the right to terminate this
Agreement at any time prior to the Closing Date by
<PAGE>
-35-
notice to the Company from the Initial Purchaser, without liability (other than
with respect to Sections 5 and 6) on the Initial Purchaser if, on or prior to
such date, (i) the Company or any of the Subsidiary Guarantors shall have
failed, refused or been unable to perform in any material respect any agreement
on its part to be performed under this Agreement, (ii) any other condition of
the obligations of the Initial Purchaser under this Agreement as provided in
Section 7 is not fulfilled when and as required in any material respect, (iii)
trading in securities generally on the New York Stock Exchange shall have been
suspended or materially limited, or minimum prices shall have been established
on such exchange by the Commission, or by such exchange or other regulatory body
or governmental authority having jurisdiction, (iv) a general banking moratorium
shall have been declared by U.S. federal, New York or Australian authorities, or
if a moratorium in foreign exchange trading by major international banks or
persons shall have been declared, (v) there is an outbreak or escalation of
hostilities or other national or international calamity on or after the date of
this Agreement, or if there has been a declaration by the United States of a
national emergency or war, the effect of which shall be, in the Initial
Purchaser's judgment, to make it inadvisable or impracticable to proceed with
the offering or delivery of the Notes on the terms and in the manner
contemplated in the Offering Memorandum or (vi) there shall have been such a
material adverse change in general economic, political or financial conditions
or the effect (or potential effect if the financial markets in the United States
have not yet opened) of international conditions on the financial markets in the
United States shall be such as, in the Initial Purchaser's judgment, to make it
inadvisable or impracticable to proceed with the offering or delivery of the
Notes on the terms and in the manner contemplated in the Offering Memorandum.
(c) Any notice of termination pursuant to this Section 10 shall be
given at the address specified in Section 11 below by telephone, telex,
telephonic facsimile or telegraph, confirmed in writing by letter.
(d) If this Agreement shall be terminated pursuant to any clause of
Section 10(b), or if the sale of the Notes provided for in this Agreement is not
consummated because any condition to the obligations of the Initial Purchaser
set forth in this Agreement is not satisfied or because of any refusal,
inability or failure on the part of either of the Company or any Subsidiary
Guarantor to perform any agreement in this Agreement or comply with any
provision of this Agreement, the Company and the Subsidiary Guarantors will,
subject to demand by the Initial
<PAGE>
-36-
Purchaser, reimburse the Initial Purchaser for all of its reasonable out-of-
pocket expenses (including the reasonable fees and expenses of the Initial
Purchaser's counsel) incurred in connection with this Agreement.
11. NOTICE. All communications with respect to or under this
Agreement, except as may be otherwise specifically provided in this Agreement,
shall be in writing and, if sent to the Initial Purchaser, shall be mailed,
delivered, or telexed, telegraphed or telecopied and confirmed in writing to SBC
Warburg Dillon Read Inc., 535 Madison Avenue, New York, New York 10022
(telephone: (212) 906-7000), Attention: Corporate Finance Department, telecopy
number: (212) 593-0164; and if sent to the Company or the Subsidiary
Guarantors, shall be mailed, delivered or telexed, telegraphed or telecopied and
confirmed in writing to Koppers Industries, Inc., 436 Seventh Avenue,
Pittsburgh, Pennsylvania 15219 (telephone: (412) 227-2001), Attention: Chief
Financial Officer, and Dickie, McCamey & Chilcote, P.C., Two PPG Place, Suite
400, Pittsburgh, Pennsylvania 15222 (telephone: (412) 281-7272, telecopy
number: (412) 227-2333.
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) when answered back, if telexed; (iv) when receipt acknowledged if
telecopied; and (v) on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
12. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Initial Purchaser and the Company and the
Subsidiary Guarantors and the controlling persons and agents referred to in
Sections 5 and 6, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The term "successors and assigns" shall not include a
----------------------
purchaser, in its capacity as such, of Notes from the Initial Purchaser.
13. CONSTRUCTION. This Agreement shall be construed in accordance
with the internal laws of the State of New York (without giving effect to any
provisions thereof relating to conflicts of law) and each of the parties hereto
consent to the jurisdiction of the courts of the State of New York. Each of the
parties hereto agrees to submit to the jurisdiction of the courts of the State
of New York and the U.S. Federal Courts sitting in the City of New York for the
purposes of any suit, action or
<PAGE>
-37-
proceeding arising out of or relating to this Indenture. Nothing herein shall
affect the right to serve process in any other manner permitted by law or shall
limit the right of the Initial Purchaser to bring proceedings against the
Company and/or the Subsidiary Guarantors in the courts of any other
jurisdiction.
14. CAPTIONS. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
15. SUBMISSION TO JURISDICTION. The Subsidiary Guarantors
irrevocably submit to the nonexclusive jurisdiction of any State or Federal
court sitting in New York over any suit, action or proceeding arising out of or
relating to this agree ment. The Subsidiary Guarantors irrevocably waive, to
the fullest extent permitted by law, any objection they may now or thereafter
have to the laying of venue of any such court and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient
forum. The Subsidiary Guarantors agree that a final judgment in any such suit,
action or proceeding brought in any such court shall be conclusive and binding
upon the Subsidiary Guarantors and may be enforced in any other courts to the
jurisdiction of which the Subsidiary Guarantors are or may be subject, by suit
upon such judgment. The Subsidiary Guarantors hereby appoint, without power of
revocation, CT Corporation System as their agent to accept and acknowledge on
its behalf service of any and all process which may be served in any suit,
action or proceeding arising out of or relating to this letter.
16. COUNTERPARTS. This Agreement may be executed in various
counterparts and by the parties to this Agreement in separate counterparty, 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.
17. MISCELLANEOUS. SBC Warburg Dillon Read Inc., an indirect, wholly
owned subsidiary of Swiss Bank Corporation, is not a bank and is separate from
any affiliated bank, including any U.S. branch or agency of Swiss Bank
Corporation. Because SBC Warburg Dillon Read Inc. is a separately incorporated
entity, it is solely responsible for its own contractual obligations and
commitments, including obligations with respect to sales purchases of
securities. Securities sold, offered or recommended by SBC Warburg Dillon Read
Inc. are not deposits, are not insured by the Federal Deposit Insurance
Corporation, are not guaranteed by a branch or agency, and are not otherwise an
obligation or responsibility of a branch or agency.
<PAGE>
-38-
A lending affiliate of SBC Warburg Dillon Read Inc. may have lending
relationships with issuers of securities underwritten or privately placed by SBC
Warburg Dillon Read Inc. To the extent required under the securities laws,
prospectuses and other disclosure documents for securities underwritten or
privately placed by SBC Warburg Dillon Read Inc. will disclose the existence of
any such lending relationships and whether the proceeds of the issue will be
used to repay debts owed to affiliates of SBC Warburg Dillon Read Inc.
Without our prior written approval, the U.S. branches and agencies of
Swiss Bank Corporation will not share with SBC Warburg Dillon Read Inc. any non-
public information concerning you, and SBC Warburg Dillon Read Inc. will not
share any non-public information received from us with any of such U.S. branches
and agencies of Swiss Bank Corporation.
<PAGE>
If the foregoing correctly sets forth the understanding among the Company, the
Subsidiary Guarantors and the Initial Purchaser, please so indicate in the space
provided below for the purpose, whereupon this letter and your acceptance shall
constitute a binding agreement among the Company, the Subsidiary guarantors and
the Initial Purchaser.
KOPPERS INDUSTRIES, INC.
By: /s/ Clayton A. Sweeney
---------------------------------
Name: Clayton A. Sweeney
Title: Director
KOPPERS INDUSTRIES INTERNATIONAL
TRADE CORP.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Secretary
WORLD WIDE VENTURES CORPORATION
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Assistant Secretary
KOPPERS INDUSTRIES OF DELAWARE,
INC.
By: /s/ M. Claire Schaming
---------------------------------
Name: M. Claire Schaming
Title: Secretary and Treasurer
<PAGE>
KOPPERS CONCRETE PRODUCTS, INC.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Secretary
CONCRETE PARTNERS INC.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Secretary
KOPPERS INDUSTRIES B.W., INC.
By: Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Secretary
<PAGE>
Confirmed and accepted as
of the date first above
written:
SBC WARBURG DILLON READ INC.
By: /s/ Kaj Ahlburg
---------------------------------
Name: Kaj Ahlburg
Title: Executive Director
By: /s/ Daniel H. Chu
---------------------------------
Name: Daniel H. Chu
Title: Executive Director
<PAGE>
Each of the undersigned by its execution hereof agrees to become a party to this
Agreement as a Guarantor as of the date set forth opposite its name:
Date: December 1, 1997
- ----
KOPPERS AUSTRALIA PTY LTD.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
CONTINENTAL CARBON AUSTRALIA
PTY LTD.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
KOPPERS TIMBER PRESERVATION
PTY LTD.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
<PAGE>
KOPPERS COAL TAR PRODUCTS PTY
LTD.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
KOPPERS SHIPPING PTY LTD.
By: /s/ Randall D. Collins
---------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
<PAGE>
Each of the undersigned by its execution hereof agrees to become a party to this
Agreement as a Guarantor as of the date set forth opposite its name:
Date: December 1, 1997
- ----
KOPPERS FOREIGN INVESTMENT
CORPORATION
By: /s/ M. Claire Schaming
---------------------------------
Name: M. Claire Schaming
Title: Assistant Secretary
<PAGE>
Exhibit A
---------
Form of Registration Rights Agreement
<PAGE>
Exhibit B
---------
Form of Opinion of Dickie, McCamie & Chilcote, P.C.
<PAGE>
Exhibit 4.2
KOPPERS INDUSTRIES, INC.,
as Issuer,
and
THE SUBSIDIARY GUARANTORS
(defined herein)
and
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
_____________________
INDENTURE
Dated as of December 1, 1997
_____________________
$175,000,000
9 7/8% Senior Subordinated Notes due 2007
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ----------------------- --------------------
<S> <C>
310(a)(1).............. 7.10
(a)(2).............. 7.10
(a)(3).............. N.A.
(a)(4).............. N.A.
(a)(5).............. 7.08; 7.10
(b)................. 7.08; 7.10; 12.02
(c)................. N.A.
311(a)................. 7.11
(b)................. 7.11
(c)................. N.A.
312(a)................. 2.05
(b)................. 12.03
(c)................. 12.03
313(a)................. 7.06
(b)(1).............. N.A.
(b)(2).............. 7.06
(c)................. 7.06; 12.02
(d)................. 7.06
314(a)................. 4.06; 4.08; 12.02
(b)................. N.A.
(c)(1).............. 12.04
(c)(2).............. 12.04
(c)(3).............. N.A.
(d)................. N.A.
(e)................. 12.05
(f)................. N.A.
315(a)................. 7.01(b)
(b)................. 7.05; 12.02
(c)................. 7.01(a)
(d)................. 7.01(c)
(e)................. 6.11
316(a)(last sentence).. 2.09
(a)(1)(A)........... 6.05
(a)(1)(B)........... 6.04
(a)(2).............. N.A.
(b)................. 6.07
(c)................. 9.05
317(a)(1).............. 6.08
(a)(2).............. 6.09
(b)................. 2.04
318(a)................. 12.01
(c)................. 12.01
- ----------------------
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
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ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions............................................... 1
SECTION 1.02. Incorporation by Reference of TIA......................... 22
SECTION 1.03. Rules of Construction..................................... 22
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating......................................... 23
SECTION 2.02. Execution and Authentication; Aggregate Principal Amount 24
SECTION 2.03. Registrar and Paying Agent.............................. 25
SECTION 2.04. Paying Agent To Hold Assets in Trust.................... 25
SECTION 2.05. Noteholder Lists........................................ 26
SECTION 2.06. Transfer and Exchange................................... 26
SECTION 2.07. Replacement Notes....................................... 27
SECTION 2.08. Outstanding Notes....................................... 27
SECTION 2.09. Treasury Notes.......................................... 28
SECTION 2.10. Temporary Notes......................................... 28
SECTION 2.11. Cancellation............................................ 28
SECTION 2.12. Defaulted Interest...................................... 29
SECTION 2.13. CUSIP Number............................................ 29
SECTION 2.14. Deposit of Moneys....................................... 29
SECTION 2.15. Book-Entry Provisions for Global Notes.................. 29
SECTION 2.16. Special Transfer Provisions............................. 31
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee....................................... 33
SECTION 3.02. Selection of Notes To Be Redeemed........................ 33
SECTION 3.03. Notice of Redemption..................................... 33
SECTION 3.04. Effect of Notice of Redemption........................... 34
SECTION 3.05. Deposit of Redemption Price.............................. 35
SECTION 3.06. Notes Redeemed in Part................................... 35
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ARTICLE FOUR
COVENANTS
<S> <C> <C>
SECTION 4.01. Payment of Notes.......................................... 35
SECTION 4.02. Maintenance of Office or Agency........................... 36
SECTION 4.03. Corporate Existence....................................... 36
SECTION 4.04. Payment of Taxes and Other Claims......................... 36
SECTION 4.05. Maintenance of Properties and Insurance................... 37
SECTION 4.06. Compliance Certificate; Notice of Default................. 37
SECTION 4.07. Compliance with Laws...................................... 38
SECTION 4.08. SEC Reports............................................... 38
SECTION 4.09. Waiver of Stay, Extension or Usury Laws................... 39
SECTION 4.10. Limitation on Restricted Payments......................... 39
SECTION 4.11. Limitation on Transactions with Affiliates................ 40
SECTION 4.12. Limitation on Debt........................................ 41
SECTION 4.13. Limitation on Payment Restrictions Affecting Subsidiaries. 42
SECTION 4.14. Limitation on Additional Senior Subordinated Indebtedness. 43
SECTION 4.15. Limitation on Change of Control........................... 43
SECTION 4.16. Limitation on Asset Dispositions.......................... 45
SECTION 4.17. Limitation on Issuance of Subsidiary Preferred Stock...... 48
SECTION 4.18. Limitation on Liens....................................... 48
SECTION 4.19. Limitation on Sale and Leaseback Transactions............. 49
SECTION 4.20. Limitation on Guarantees of Debt by Subsidiaries.......... 49
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. ............................... 50
SECTION 5.02. Successor Corporation Substituted........................... 51
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default......................................... 51
SECTION 6.02. Acceleration.............................................. 53
SECTION 6.03. Other Remedies............................................ 54
SECTION 6.04. Waiver of Past Defaults................................... 54
SECTION 6.05. Control by Majority....................................... 54
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<S> <C> <C>
SECTION 6.06. Limitation on Suits....................................... 54
SECTION 6.07. Rights of Holders To Receive Payment...................... 55
SECTION 6.08. Collection Suit by Trustee................................ 55
SECTION 6.09. Trustee May File Proofs of Claim.......................... 55
SECTION 6.10. Priorities................................................ 56
SECTION 6.11. Undertaking for Costs..................................... 57
SECTION 6.12. Restoration of Rights and Remedies........................ 57
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee......................................... 57
SECTION 7.02. Rights of Trustee......................................... 58
SECTION 7.03. Individual Rights of Trustee.............................. 59
SECTION 7.04. Trustee's Disclaimer...................................... 60
SECTION 7.05. Notice of Default......................................... 60
SECTION 7.06. Reports by Trustee to Holders............................. 60
SECTION 7.07. Compensation and Indemnity................................ 60
SECTION 7.08. Replacement of Trustee.................................... 61
SECTION 7.09. Successor Trustee by Merger, Etc.......................... 62
SECTION 7.10. Eligibility; Disqualification............................. 63
SECTION 7.11. Preferential Collection of Claims Against Company......... 63
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 8.01. Satisfaction and Discharge of Indenture.................. 63
SECTION 8.02. Defeasance and Discharge of Indenture.................... 64
SECTION 8.03. Defeasance of Certain Obligations........................ 66
SECTION 8.04. Application by Trustee of Funds
Deposited for Payment of Notes........................... 67
SECTION 8.05. Repayment of Moneys Held by Paying Agent................. 67
SECTION 8.06. Return of Moneys Held by Trustee and Paying Agent
Unclaimed for Three Years................................ 67
SECTION 8.07. Reinstatement............................................ 68
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
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SECTION 9.01. Without Consent of Holders................................ 68
SECTION 9.02. With Consent of Holders................................... 69
SECTION 9.03. Effect on Senior Debt..................................... 70
SECTION 9.04. Compliance with TIA....................................... 70
SECTION 9.05. Revocation and Effect of Consents......................... 70
SECTION 9.06. Notation on or Exchange of Notes.......................... 71
SECTION 9.07. Trustee To Sign Amendments, Etc........................... 71
ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt........................ 72
SECTION 10.02. No Payment on Notes in Certain Circumstances............. 72
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, Etc........... 74
SECTION 10.04. Payments May Be Paid Prior to Dissolution............... 75
SECTION 10.05. Subrogation.............................................. 75
SECTION 10.06. Obligations of the Company Unconditional................. 76
SECTION 10.07. Notice to Trustee........................................ 76
SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating
Agent.................................................... 77
SECTION 10.09. Trustee's Relation to Senior Debt........................ 77
SECTION 10.10. Subordination Rights Not Impaired by Acts or.............
Omissions of the Company or Holders of Senior Debt....... 78
SECTION 10.11. Noteholders Authorize Trustee To Effectuate
Subordination of Notes................................... 78
SECTION 10.12. This Article Ten Not To Prevent Events of Default........ 79
SECTION 10.13. Trustee's Compensation Not Prejudiced.................... 79
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee.................................. 79
SECTION 11.02. Subordination of Guarantee............................... 80
SECTION 11.03. Severability............................................. 80
SECTION 11.04. Release of a Subsidiary Guarantor........................ 81
SECTION 11.05. Limitation of Subsidiary Guarantor's Liability........... 81
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<S> <C> <C>
SECTION 11.06. Subsidiary Guarantors May Consolidate, Etc., on Certain Terms.. 81
SECTION 11.07. Contribution................................................... 82
SECTION 11.08. Waiver of Subrogation.......................................... 83
SECTION 11.09. Execution of Guarantee; Additional Subsidiary Guarantors....... 83
SECTION 11.10. No Payment on Guarantees in Certain Circumstances.............. 84
SECTION 11.11. Payment Over of Proceeds Upon Dissolution, Etc................. 86
SECTION 11.12. Payments May Be Paid Prior to Dissolution...................... 87
SECTION 11.13. Subrogation.................................................... 88
SECTION 11.14. Obligations of Each Guarantor Unconditional.................... 88
SECTION 11.15. Notice to Trustee.............................................. 89
SECTION 11.16. Reliance on Judicial Order or Certificate of Liquidating Agent. 89
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt.................... 90
SECTION 11.18. Subordination Rights Not Impaired by Acts or Omissions of a....
Subsidiary Guarantor or Holders of Guarantor Senior Debt....... 90
SECTION 11.19. Noteholders Authorize Trustee To Effectuate Subordination
of Guarantees.................................................. 91
SECTION 11.20. This Article Eleven Not To Prevent Events of Default........... 91
SECTION 11.21. Trustee's Compensation Not Prejudiced.......................... 91
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.................................................. 92
SECTION 12.02. Notices....................................................... 92
SECTION 12.03. Communications by Holders with Other Holders.................. 93
SECTION 12.04. Certificate and Opinion as to Conditions Precedent............ 93
SECTION 12.05. Statements Required in Certificate or Opinion................. 94
SECTION 12.06. Rules by Trustee, Paying Agent, Registrar..................... 94
SECTION 12.07. Legal Holidays................................................ 94
SECTION 12.08. Governing Law................................................. 94
SECTION 12.09. No Adverse Interpretation of Other Agreements................. 95
SECTION 12.10. No Recourse Against Others.................................... 95
SECTION 12.11. Successors.................................................... 95
SECTION 12.12. Duplicate Originals........................................... 95
SECTION 12.13. Severability.................................................. 95
Signatures.................................................... 96
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<S> <C> <C>
Exhibit A(1) - Form of Initial Note with Guarantee......................... A.1-1
Exhibit A(2) - Form of Exchange Note with Guarantee........................ A.2-1
Exhibit B - Form of Legend for Global Notes............................. B-1
Exhibit C - Form of Certificate To Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors.............. C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S.......................... D-
Schedule I - Management Investors
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
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<PAGE>
INDENTURE, dated as of December 1, 1997, among Koppers Industries, Inc., a
Pennsylvania corporation (the "Company"), the Subsidiary Guarantors (as
-------
hereinafter defined) and PNC Bank, National Association, as Trustee (the
"Trustee").
- --------
The Company has duly authorized the creation of an issue of 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes") and, to provide therefor, the Company
-----
has duly authorized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed by the Company and
authenticated and delivered hereunder, the valid obligations of the Company, and
to make this Indenture a valid and binding agreement of the Company, have been
done.
Each party hereto agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acceleration Notice" has the meaning provided in Section 6.02.
-------------------
"Acquisition Debt" means Debt of any Person existing at the time such Person
----------------
became a Subsidiary of the Company (or such Person is merged into the Company or
one of its Subsidiaries) or assumed in connection with the acquisition of assets
from any such Person (other than assets acquired in the ordinary course of
business), including Debt Incurred in connection with, or in contemplation of,
such Person becoming a Subsidiary of the Company (or such Person being merged
into the Company or one of its Subsidiaries) (but excluding Debt of such Person
which is extinguished, retired or repaid in connection with such Person becoming
a Subsidiary of the Company).
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
-------------------
lesser of the amount by which (i) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantee of such Subsidiary Guarantor at such
date and (ii) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Subsidiary Guarantor in respect of the obligations of such Subsidiary under its
Subsidiary Guarantee), excluding debt in respect of its Subsidiary Guarantee, as
they become absolute and matured.
<PAGE>
-2-
"Affiliate" of any Person means any other Person directly or indirectly
---------
controlling or controlled by or under direct or indirect common control with
such Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, no Person (other than the Company or any Subsidiary of the Company)
in whom a Receivables Subsidiary makes an investment solely in connection with a
Receivables Transaction shall be deemed to be an Affiliate of the Company or any
of its Subsidiaries with respect to such investment (but may be deemed an
Affiliate with respect to other transactions, if applicable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
-----
"Agent Members" has the meaning provided in Section 2.15.
-------------
"Approved Government Financing" means below-market interest rate financing
-----------------------------
provided by or through any governmental or quasi-government subdivision, agency,
office or instrumentality or pursuant to any government approved or supported
loan program.
"Asset Acquisition" means (i) an investment by the Company or any of its
-----------------
Subsidiaries in any other Person pursuant to which such Person will become a
Subsidiary of the Company or will be merged with the Company or any of its
Subsidiaries or (ii) the acquisition by the Company or any of its Subsidiaries
of the assets of any Person which constitute substantially all of an operating
unit or business of such Person.
"Asset Disposition" means, with respect to any Person, any sale, transfer,
-----------------
conveyance, lease or other disposition (including, without limitation, by way of
merger, consolidation or sale-leaseback) by such Person or any of its
Subsidiaries to any Person (other than to such Person or a Wholly-Owned
Subsidiary of such Person and other than in the ordinary course of business) of
(i) any assets of such Person or any of its Subsidiaries or (ii) any shares of
Capital Stock of such Person's Subsidiaries. For purposes of this definition,
any disposition in connection with directors' qualifying shares or investments
by foreign nationals mandated by applicable law shall not constitute an Asset
Disposition. For purposes of this definition, the term "Asset Disposition" will
not include (x) any sale, transfer, conveyance, lease or other disposition of
assets and properties of the Company that is governed by the provisions of
Article Five or (y) the contribution of substantially all of the assets of KAP
Investments, Inc., a Wholly-Owned Subsidiary of Koppers Australia, to a to-be-
formed corporation, incorporated in one of the United States of America, which
shall be a Wholly-Owned Subsidiary of the Company.
"Attributable Debt" means, with respect to any Sale and Leaseback
-----------------
Transaction, at the date of determination, the present value (discounted at the
rate of interest implicit in the terms of the
<PAGE>
-3-
lease) of the obligation of the lessee for net rental payments during the
remaining term of the lease (including any period for which such lease has been
extended or may, at the option of the lessor, be extended). "Net rental
payments" under any lease for any period means the sum of such rental and other
payments required to be paid in such period by the lessee thereunder, not
including, however, any amount required to be paid by such lessee (whether or
not designated as rent or additional rent) on account of maintenance and
repairs, insurance, taxes, assessments, water rates or similar charges required
to be paid by such lessee thereunder or any amounts required to be paid by such
lessee thereunder contingent upon the amount of sales, maintenance and repairs,
insurance, taxes, assessments, water rates or similar charges.
"Authenticating Agent" has the meaning provided in Section 2.02.
--------------------
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state or
--------------
foreign law for the relief of debtors.
"Board of Directors" means either the Board of Directors of the Company or
------------------
any committee of such Board duly authorized to act under this Indenture.
"Board Resolution" means, with respect to any person, a copy of a resolution
----------------
certified by the Secretary or an Assistant Secretary of such person to have been
duly adopted by the Board of Directors of such person and to be in full force
and effect on the date of such certification, and delivered to the Trustee.
"Business Day" means a day which in the city (or in any of the cities, if
------------
more than one) where amounts are payable in respect of the Notes, as specified
on the face of the form of Note recited above, and where the Corporate Trust
Office is located, is neither a legal holiday nor a day on which banking
institutions are authorized by law or regulation to close.
"Capital Stock" means, with respect to any Person, any and all shares,
-------------
interests, participations or other equivalents (however designated) of such
Person's capital stock or equity interests whether now outstanding or issued
after the date of this Indenture, including, without limitation, all Common
Stock and all Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
-----------------
property (whether real, personal or mixed) the rental obligations of such Person
as lessee under which, in conformity with generally accepted accounting
principles, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligation" means, as applied to any Person, the rental
----------------------------
obligation required to be capitalized on the balance sheet of such Person under
any Capitalized Lease of such Person.
<PAGE>
-4-
"Cash Equivalents" means, at any time, (i) Debt with a maturity of one year
----------------
or less issued or directly and fully guaranteed or insured by the United States
or any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof), (ii) certificates of
deposit or acceptances with a maturity of one year or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000, (iii)
commercial paper with a maturity of 270 days or less issued by a corporation
(except an Affiliate of the Company) organized under the laws of any state of
the United States or the District of Columbia and rated at least A-1 by S&P or
at least P-1 by Moody's, (iv) repurchase agreements with institutions described
in clause (ii) with respect to investments described in clause (i), (v) market
auction preferred stock rated in the highest rating by S&P and Moody's and (vi)
money market mutual funds rated in the highest rating by S&P and Moody's or
investing solely in investments described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following events
-----------------
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, 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 shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 50% of the total voting power of the then
outstanding Common Stock of the Company; (ii) the Company consolidates with, or
merges with or into, another Person or the Company or its Subsidiaries sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the assets of the Company and its Subsidiaries (determined on a consolidated
basis) to any Person, other than any such transaction where immediately after
such transaction the Person or Persons that "beneficially owned" (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) immediately prior to such transaction, directly or
indirectly, the then outstanding Common Stock of the Company "beneficially own"
(as so determined), directly or indirectly, a majority of the total voting power
of the then outstanding Common Stock of the surviving or transferee Person; or
(iii) following the first public offering of Common Stock of the Company, during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (which, for purposes of the definition
of "Change of Control," shall not include any committee thereof) of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was
<PAGE>
-5-
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"Change of Control Offer" has the meaning provided in Section 4.15.
-----------------------
"Change of Control Purchase Price" has the meaning provided in Section 4.15.
--------------------------------
"Company" means Koppers Industries, Inc., a Pennsylvania corporation, and its
-------
successors that become a party to this Indenture in accordance with its terms.
"Common Stock" means, with respect to any Person, any and all shares,
------------
interests, participations and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the date of this Indenture, and includes, without limitation, all
series and classes of such common stock.
"Consolidated Capital Expenditures" means, for any period, the aggregate of
---------------------------------
all expenditures incurred (whether paid in cash or accrued as liabilities and
including Capitalized Lease Obligations) by the Company and its Subsidiaries
during such period that, in conformity with generally accepted accounting
principles, are included as capital expenditures in the consolidated statement
of cash flows of the Company and its Consolidated Subsidiaries.
"Consolidated Fixed Charges" of any Person means, for any period, the
--------------------------
aggregate (without duplication) of (i) Consolidated Interest Expense and (ii)
the interest attributable to Capitalized Leases, determined on a consolidated
basis for such Person and its Consolidated Subsidiaries for such period in
accordance with generally accepted accounting principles of such Person.
"Consolidated Fixed Charge Ratio" means the ratio, on a pro forma basis, of
-------------------------------
(i) the aggregate amount of EBITDA of any Person for the Reference Period
immediately prior to the Determination Date to (ii) the aggregate Consolidated
Fixed Charges of such Person during such Reference Period; provided that for
purposes of such computation, in calculating EBITDA and Consolidated Fixed
Charges, (1) the Incurrence of the Debt giving rise to the need to calculate the
Consolidated Fixed Charge Ratio and the application of the proceeds therefrom
will be assumed to have occurred on the first day of the Reference Period, (2)
Asset Dispositions and Asset Acquisitions which occur during the Reference
Period or subsequent to the Reference Period and prior to the Determination Date
(but including any Asset Acquisition to be made with the Debt Incurred pursuant
to (1) above) will be assumed to have occurred on the first day of the Reference
Period, (3) the Incurrence of any Debt during the Reference Period or subsequent
to the Reference Period and prior to the Determination Date and the application
of the proceeds therefrom will be assumed to have occurred on the first day of
such Reference Period, (4) Consolidated Interest Expense attributable to any
Debt (whether existing or being Incurred) computed on a pro forma basis and
bearing a floating interest rate will be computed as if the rate
<PAGE>
-6-
in effect on the date of computation had been the applicable rate for the entire
period unless such Person or any of its Subsidiaries is a party to an Interest
Rate Agreement (which will remain in effect for the twelve month period after
the Determination Date) which has the effect of fixing the interest rate on the
date of computation, in which case such rate (whether higher or lower) will be
used and (5) there will be excluded from Consolidated Fixed Charges any
Consolidated Fixed Charges related to any Debt which was outstanding during and
subsequent to the Reference Period but is not outstanding on the Determination
Date, except for Consolidated Fixed Charges actually incurred with respect to
Debt borrowed (as adjusted pursuant to clause (4)) under a revolving credit or
similar arrangement to the extent the commitment thereunder remains in effect on
the Determination Date. For the purposes of making the computation referred to
above, Asset Dispositions and Asset Acquisitions which have been made by any
Person which has become a Subsidiary of the Company or been merged with or into
the Company or any Subsidiary of the Company during the Reference Period or
subsequent to the Reference Period and prior to the Determination Date will be
calculated on a pro forma basis (including all of the calculations referred to
in numbers (1) through (5) above) assuming such Asset Dispositions or Asset
Acquisitions occurred on the first day of the Reference Period.
"Consolidated Interest Expense" of any Person means, for any period, without
-----------------------------
duplication, the sum of the interest expense on all Debt of such Person and its
Consolidated Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP and including, without limitation, (i) imputed interest on
Capitalized Lease Obligations and Attributable Debt, (ii) commissions, discounts
and other fees and charges owed with respect to letters of credit securing
financial obligations and bankers' acceptance financing, (iii) amortization of
other financing fees and expenses, (iv) the interest portion of any deferred
payment obligations, (v) amortization of debt discount or premium, if any, (vi)
all other non-cash interest expense, (vii) capitalized interest, (viii) all
interest payable with respect to discontinued operations, and (ix) all interest
on any Debt of any other Person guaranteed by the referent Person or any of its
Consolidated Subsidiaries.
"Consolidated Net Income" of any Person for any period means the Net Income
-----------------------
of such Person and its Consolidated Subsidiaries for such period, determined on
a consolidated basis in accordance with generally accepted accounting
principles; provided that there will be excluded (i) the Net Income of any
Person, other than a Consolidated Subsidiary, in which such Person or any of its
Consolidated Subsidiaries has a joint interest with a third party except to the
extent of the amount of dividends or distributions actually paid to such Person
or a Consolidated Subsidiary during such period, (ii) except to the extent
includible pursuant to the foregoing clause (i), the Net Income of any Person
accrued prior to the date it becomes a Subsidiary of such Person or is merged
into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or any of its Subsidiaries; provided
that clause (ii) will not be effective for any calculation of the Consolidated
Fixed Charge Ratio, (iii) the Net Income (if positive) of any Subsidiary to the
extent that the declaration or payment of dividends
<PAGE>
-7-
or similar distributions by that Subsidiary to the Company of such Net Income is
not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any gains or losses attributable
to Asset Dispositions and (v) without duplication, any extraordinary gains or
losses realized during such period, including any related tax effects on such
Person.
"Consolidated Subsidiary" of any Person means a Subsidiary which for
-----------------------
financial reporting purposes is or, in accordance with generally accepted
accounting principles, should be, accounted for by such Person as a consolidated
subsidiary.
"Corporate Trust Office" means the office of the Trustee at which the
----------------------
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date as of which this
Indenture is dated, located at One Oliver Plaza, 27th Floor, 210 Sixth Avenue,
Pittsburgh, PA 15219.
"Covenant Defeasance" has the meaning provided in Section 8.03.
-------------------
"Currency Agreement" means any foreign exchange contract, currency swap
------------------
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator
---------
or similar official under any Bankruptcy Law.
"Debt" of any Person means, at any date, without duplication, (i) all
----
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of letters of credit or bankers'
acceptance or other similar instruments (or reimbursement obligations with
respect thereto), (iv) all obligations of such Person to pay the deferred
purchase price of property or services, except Trade Payables, (v) all
obligations of such Person as lessee under Capitalized Leases, (vi) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person provided that, for purposes of determining the amount
of any Debt of the type described in this clause, if recourse with respect to
such Debt is limited to such asset, the amount of such Debt will be limited to
the fair market value of such asset, (vii) all Debt of others Guaranteed by such
Person, (viii) obligations under Currency Agreements and Interest Rate
Agreements (the "principal amount" of which shall be the amount then payable by
such Person upon termination thereof due to default by such Person) and (ix) the
Attributable Debt with respect to any Sale and Lease Back Transaction.
"Default" means any event which is, or after notice or passage of time or
-------
both would be, an Event of Default.
<PAGE>
-8-
"Defeasance Trust" has the meaning provided in Section 10.02.
----------------
"Defeasance Trust Payment" has the meaning provided in Section 10.02.
------------------------
"Depository" means The Depository Trust Company, its nominees and successors.
----------
"Designated Senior Debt" means any Debt outstanding under the New Credit
----------------------
Facilities.
"Determination Date" means the date of the transaction giving rise to the
------------------
need to make a calculation required by certain of the covenants included in this
Indenture.
"EBITDA" of any Person for any period means the Consolidated Net Income of
------
such Person plus, in each case to the extent deducted in determining
Consolidated Net Income for such period, (i) income taxes (other than income
taxes (either positive or negative) attributable to extraordinary and
nonrecurring gains or losses or sales of assets), (ii) Consolidated Fixed
Charges, (iii) depreciation and amortization expense and (iv) all other non-cash
items reducing Consolidated Net Income for such period, minus all non-cash items
increasing Consolidated Net Income for such period, all determined on a
consolidated basis for such Person and its Consolidated Subsidiaries in
accordance with generally accepted accounting principles.
"Event of Default" means any event or condition specified as such in Section
----------------
6.01 which will have continued for the period of time, if any, therein
designated.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations of the SEC promulgated thereunder.
"Exchange Notes" means the 9 7/8% Senior Subordinated Notes due 2007 to be
--------------
issued in exchange for the Initial Notes in the Exchange Offer.
"Exchange Offer" has the meaning assigned to such term in the Registration
--------------
Rights Agreement.
"Funding Guarantor" has the meaning provided in Section 11.07.
-----------------
"GAAP" or "generally accepted accounting principles" means generally accepted
---- ----------------------------------------
accounting principles in the United States as in effect as of the date of this
Indenture, including, without limitation, those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
approved by a significant segment of the accounting profession.
<PAGE>
-9-
"Global Note" has the meaning provided in Section 2.01.
-----------
"Guarantee" by any Person means any obligation, contingent or otherwise, of
---------
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation of such other Person (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee will not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantor Payment Blockage Period" has the meaning provided in Section
---------------------------------
11.10(a).
"Guarantor Payment Blockage Notice" has the meaning provided in Section
---------------------------------
11.10(a).
"Guarantor Senior Debt" means, with respect to any Subsidiary Guarantor, at
---------------------
any date, (a) all Obligations, if any, of such Subsidiary Guarantor under the
New Credit Facilities; (b) all Obligations of such Subsidiary Guarantor under
Currency Agreements and Interest Rate Agreements (including Post-Petition
Interest); (c) all Obligations of such Subsidiary Guarantor under stand-by
letters of credit; and (d) all other Debt of such Subsidiary Guarantor for
borrowed money, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Debt unless the instrument under which such Debt
of such Subsidiary Guarantor for money borrowed is Incurred expressly provides
that such Debt for money borrowed is not senior or superior in right of payment
to such Subsidiary Guarantor's Subsidiary Guarantee, and all renewals,
extensions, modifications, amendments or refinancings thereof. Notwithstanding
the foregoing, Guarantor Senior Debt shall not include (a) to the extent that it
may constitute Debt, any Obligation for Federal, state, local or other taxes;
(b) any Debt among or between such Subsidiary Guarantor and any Subsidiary of
such Subsidiary Guarantor; (c) to the extent that it may constitute Debt, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
Debt evidenced by such Subsidiary Guarantor's Subsidiary Guarantee; (e) Debt of
such Subsidiary Guarantor that is expressly subordinate or junior in right of
payment to any other Debt of such Subsidiary Guarantor; (f) to the extent that
it may constitute Debt, any obligation owing under leases (other than
Capitalized Lease Obligations); and (g) any obligation that by operation of law
is subordinate to any general unsecured obligations of such Subsidiary
Guarantor.
"Hickson" means Koppers-Hickson Investments Pty. Limited and its wholly-owned
-------
subsidiaries.
<PAGE>
-10-
"Holder," "Holder of Notes," "Noteholder" or other similar terms means the
------ --------------- ----------
registered holder of any Note.
"Incurrence" means the incurrence, creation, assumption or in any other
----------
manner becoming liable with respect to, or becoming responsible for the payment
of, any Debt. "Incur" has a comparable meaning.
"Indenture" means this Indenture, as amended or supplemented from time to
---------
time in accordance with the terms hereof.
"Independent Financial Advisor" means a nationally recognized investment
-----------------------------
banking, accounting or appraisal firm (i) which does not (and whose directors,
officers, employees and Affiliates do not) have a direct or indirect material
financial interest in the Company or any of its Subsidiaries and (ii) which, in
the sole judgment of the Board of Directors of the Company, is otherwise
independent and qualified to perform the task for which such firm is being
engaged.
"Initial Notes" means, collectively, the 9 7/8% Senior Subordinated Notes due
-------------
2007 of the Company issued on the Issue Date pursuant to Section 2.02, for so
long as such securities constitute Restricted Securities.
"Insolvency or Liquidation Proceeding" means, with respect to any Person, any
------------------------------------
liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that is an
---------------------------------
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" when used with respect to any Note, means the stated
---------------------
maturity of an installment of interest specified in such Note.
"Interest Rate Agreement" means any interest rate protection agreement,
-----------------------
interest rate future, interest rate option, interest rate swap, interest rate
cap or other interest rate hedge arrangement, to or under which the Company or
any of its Subsidiaries is a party or a beneficiary on the date of this
Indenture or becomes a party or a beneficiary thereafter.
"Investment" means any investment in any Person, whether by means of share
----------
purchase, capital contribution, loan, time deposit or otherwise (but not
including any demand deposit).
"Issue Date" means December 1, 1997.
----------
<PAGE>
-11-
"Koppers Australia" means Koppers Australia Pty. Limited.
-----------------
"Legal Defeasance" has the meaning provided in Section 8.02.
----------------
"Legal Holiday" has the meaning provided in Section 12.07.
-------------
"Lien" means, with respect to any Property, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
Property. For the purposes of this Indenture, the Company will be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"Management Investors" means the individuals set forth on Schedule I hereto.
--------------------
"Management Redemption Offer" means the Company's offer to redeem shares of
---------------------------
its Common Stock held by eligible Management Investors at a price of $17.00 per
share, which offer shall be open for a period of 60 days following the Issue
Date and will be subject to the limitations described in the offering memorandum
relating to the Offering.
"Maturity Date" means December 1, 2007.
-------------
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Monessen Facility" means the Company's coke facility located in Monessen,
-----------------
Pennsylvania.
"Monessen Section 29 Tax Credits " means the tax credits available under
--------------------------------
Section 29 of the U.S. Internal Revenue Code associated with the operations of
the Monessen Facility.
"Net Cash Proceeds" from an Asset Disposition means cash or Cash Equivalents
-----------------
received (including any cash or Cash Equivalents received by way of deferred
payment of principal pursuant to, or upon disposition of, a note or installment
receivable or otherwise, but only as and when received (including any cash or
Cash Equivalents received upon sale or disposition of such note or receivable),
and excluding any other consideration (i) received in the form of assumption by
the acquiring Person of Debt or other obligations relating to the assets
disposed of in such Asset Disposition or (ii) until converted to cash or Cash
Equivalents, received in any other non-cash form) therefrom, in each case, net
of all legal, accounting and investment banking fees and expenses, brokerage
commissions and other fees and expenses incurred, and provision for all taxes
(whether or not such taxes will actually be paid or payable) as a result of such
Asset Disposition without regard to the consolidated results of operation of the
Company and its Subsidiaries as a consequence of such Asset Disposition,
transfer or other disposition, in each
<PAGE>
-12-
case net of a reasonable reserve for the after-tax cost of any indemnification
payments (fixed and contingent) attributable to seller's indemnities to the
purchaser undertaken by the Company or any of its Subsidiaries in connection
with such Asset Disposition (but excluding any payments, which by the terms of
the indemnities will not, under any circumstances, be made during the term of
the Notes), and net of all payments made on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which is required to be repaid as a result of such Asset Disposition.
Notwithstanding the foregoing, the term "Net Cash Proceeds" will not include 50%
of that portion of the net after tax cash proceeds from the sale, transfer,
conveyance, lease or other disposition of the Monessen Facility that is directly
attributable to the Monessen Section 29 Tax Credits.
"Net Income" of any Person for any period means the net income (loss) of such
----------
Person for such period, determined in accordance with generally accepted
accounting principles, except that extraordinary and nonrecurring gains and
losses as determined in accordance with generally accepted accounting principles
will be excluded.
"Net Worth" of any Person means as of any date the aggregate of capital,
---------
surplus and retained earnings of such Person and its Consolidated Subsidiaries
as would be shown on a consolidated balance sheet of such Person and its
Consolidated Subsidiaries prepared as of such date in accordance with generally
accepted accounting principles; provided that capital and surplus attributable
to Redeemable Stock will be excluded.
"New Credit Facilities" means the Credit Agreement dated as of November 24,
---------------------
1997, among the Company, the guarantors listed therein, the lenders listed
therein, and SBC Warburg Dillon Read Inc., Swiss Bank Corporation, Stamford
Branch and Mellon Bank, N.A., as Agents, as such agreement may be amended,
restated, supplemented or otherwise modified from time to time, and includes (i)
the Australian dollar denominated term loan and revolving credit facility
described therein, (ii) any credit, securities purchase or similar agreement
extending the maturity of, or restructuring all or any portion of, the Debt
under the New Credit Facilities or any successor agreement and (iii) any
agreement with one or more lenders or purchasers refinancing all or any portion
of the Debt under the New Credit Facilities or any successor agreement,
including, in the case of clauses (ii) or (iii), any increased amount of Debt
thereunder but only to the extent such increased amount of Debt is permitted to
be incurred under clause (viii) of the first paragraph of Section 4.12.
"Non-U.S. person" means a person who is not a U.S. person, as defined in
---------------
Regulation S.
"Notes" means, collectively, the Initial Notes and the Exchange Notes,
-----
treated as a single class of securities, as amended or supplemented from time to
time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
<PAGE>
-13-
"Obligations" means any principal, interest (including, without limitation,
-----------
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages (including liquidated damages) and other liabilities
payable under the documentation governing any Debt.
"Offer" has the meaning provided in Section 4.16.
-----
"Offer Amount" has the meaning provided in Section 4.16.
------------
"Offer Period" has the meaning provided in Section 4.16.
------------
"Offering" means the issuance and sale of Initial Notes in an aggregate
--------
principal amount of $175,000,000 on the Issue Date.
"Officer" means, with respect to any person, the Chairman of the Board, the
-------
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Controller, or the Secretary of such person, or any
other officer designated by the Board of Directors serving in a similar
capacity.
"Officers' Certificate" means a certificate signed by the Chairman of the
---------------------
Board of Directors or the President or any Vice President (whether or not
designated by a number or numbers or a word or words added before or after the
title "Vice President") and by the Treasurer or the Secretary or any Assistant
Secretary of the Company and delivered to the Trustee. Each such certificate
will comply with Section 314 of the TIA as well as Sections 12.04 and 12.05.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
-----------------------
"Opinion of Counsel" means an opinion in writing signed by legal counsel who
------------------
may be an employee of or counsel to the Company or who may be other counsel
satisfactory to the Trustee. Each such opinion will comply with Section 314 of
the TIA as well as Sections 12.04 and 12.05.
"Other Debt" has the meaning provided in Section 4.20.
----------
"Paying Agent" has the meaning provided in Section 2.03.
------------
"Payment Blockage Notice" has the meaning provided in Section 10.02.
-----------------------
"Payment Blockage Period" has the meaning provided in Section 10.02.
-----------------------
"Permitted Debt" means Debt described in clauses (i) through (xiv) of Section
--------------
4.12.
<PAGE>
-14-
"Permitted Holders" means Saratoga and its affiliates and the Management
-----------------
Investors, each of the spouses, children (adoptive or biological) or other
lineal descendants of the Management Investors, the probate estate of any such
individual and any trust, so long as one or more of the foregoing individuals
retains substantially all of the controlling or beneficial interest thereunder.
"Permitted Junior Securities" means any securities of the Company, any
---------------------------
Subsidiary Guarantor or any successor to the Company or any Subsidiary
Guarantor, as the case may be, issued pursuant to a plan of reorganization or
readjustment of the Company or such Subsidiary Guarantor or successor that are
(i) equity securities without covenants or rights of mandatory or optional
redemption or (ii) subordinated in right of payment to all Senior Debt or
Guarantor Senior Debt, as the case may be, that may at the time be outstanding,
to substantially the same extent as, or to a greater extent than, the Notes are
subordinated as provided in this Indenture, in any event pursuant to a court
order so providing and as to which (a) the rate of interest on such securities
shall not exceed the effective rate of interest on the Notes on the date of this
Indenture, (b) such securities shall not be entitled to the benefits of
covenants or defaults materially more beneficial to the holders of such
securities than those in effect with respect to the Notes on the date of this
Indenture and (c) such securities shall not provide for amortization (including
sinking fund and mandatory prepayment provisions) commencing prior to the date
six months following the final scheduled maturity date of the Senior Debt or
Guarantor Senior Debt, as the case may be (as modified by the plan of
reorganization of readjustment pursuant to which such securities are issued).
"Permitted Liens" means (i) Liens securing Debt existing as of the Issue Date
---------------
(after giving effect to the use of proceeds of issuance of the Notes), and
related interest, fees and obligations of the Company thereunder; (ii) Liens
with respect to assets of a Subsidiary granted by such Subsidiary to the Company
to secure Debt owing to the Company; (iii) statutory Liens or landlords and
carriers', warehouseman'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 will be
required in conformity with GAAP will have been made therefor; (iv) Liens for
taxes, assessments, government 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 will be
required in conformity with GAAP will have been made therefor; (v) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (vi) Liens created or 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 Debt); (vii) easements, rights-of-
way, restrictions and other similar charges or encumbrances not interfering in
any material respect with the business of the Company or any of its Subsidiaries
incurred in the ordinary course of
<PAGE>
-15-
business; (viii) any attachment or judgment Lien that does not give rise to an
Event of Default; (ix) rights of banks to set off deposits against debts owed to
said bank; (x) Liens on the assets of any entity existing at the time such
assets are acquired by the Company or any of its Subsidiaries, whether by
merger, consolidation, purchase of assets or otherwise; provided that such Liens
(A) are not created, incurred or assumed in connection with, or in contemplation
of, such assets being acquired by the Company or any of its Subsidiaries and (B)
do not extend to any other Property of the Company or any of its Subsidiaries;
(xi) Liens securing reimbursement obligations with respect to letters of credit
which encumber documents and goods sold relating to such letters of credit and
the products and proceeds thereof; (xii) 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; (xiii) Liens encumbering property or
assets under construction arising from progress or partial payments by a
customer of the Company or one of its Subsidiaries relating to such property or
assets; (xiv) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; provided that any Sale and Leaseback
Transaction related thereto complies with Section 4.19; (xv) Liens upon real or
tangible personal property acquired after the date on which the Notes are issued
under this Indenture; provided, however, that (x) such Lien is created solely
for the purpose of securing Debt Incurred (A) to finance the cost (including the
cost of improvement or construction) of the item of property or assets subject
thereto and such Lien is created prior to, at the time of or within 12 months
after the later of the acquisition, the completion of construction or the
commencement of full operation of such property or (B) to refinance any Debt
previously so secured, (y) the principal amount of the Debt secured by such Lien
does not exceed 100% of such cost and (z) any such Lien will not extend to or
cover any property or assets other than such item or property or assets and any
improvements on such item; (xvi) Liens securing obligations under Interest Rate
Agreements and Currency Agreements; (xvii) Liens on accounts receivable and
inventory securing working capital borrowings (including interest, fees and
other obligations in respect thereof) made by the Company or its Subsidiaries in
accordance with Section 4.12; (xviii) Liens on the assets of a Receivables
Subsidiary in a Receivables Transaction; and (xix) any extension, renewal or
replacement, in whole or in part, of any Lien described in the foregoing clauses
(i), (x) and (xv); provided that any such extension, renewal or replacement will
not extend to any other assets of the Company or any of its Subsidiaries other
than the assets originally covered by such Lien or any improvements thereon or
additions or accessions thereto.
"Permitted Payments" means with respect to the Company or any of its
------------------
Subsidiaries (i) any dividend on shares of Capital Stock payable solely in
shares of Capital Stock (other than Redeemable Stock) or in options, warrants or
other rights to purchase Capital Stock (other than Redeemable Stock); (ii) any
dividend or other distribution or payment in respect of redemption of Capital
Stock payable to the Company by any of its Subsidiaries or by a Subsidiary to
another Subsidiary or the retirement of any shares of the Company held by any
Wholly-Owned Subsidiary of the Company; (iii) the repurchase or other
acquisition or retirement for value of any shares of the Company's Capital
Stock, or any option, warrant or other right to purchase shares of the
<PAGE>
-16-
Company's Capital Stock with additional shares of, or out of the net proceeds of
a substantial contemporaneous issuance of, Capital Stock other than Redeemable
Stock; (iv) the retirement of any shares of Redeemable Capital Stock by
conversion into, or by exchange for, additional shares of Redeemable Capital
Stock, or out of the net proceeds of the substantial contemporaneous issuance
(other than to a Subsidiary of the Company) of other shares of Redeemable
Capital Stock; (v) the payment of management, advisory or consulting fees to
Saratoga or its affiliates in an amount not to exceed $600,000 per year; (vi)
the redemption of shares of the Company's Common Stock from Management Investors
as part of the Management Redemption Offer in an amount not to exceed
$15,000,000; (vii) the redemption of shares of the Company's Common Stock from
APT Holdings Corporation in an amount not to exceed $23,000,000; (viii) any
voluntary prepayment or defeasance, redemption, repurchase or other acquisition
for value of any Debt which by its terms ranks subordinate in right of payment
to the Notes with the net proceeds from the issuance of (a) Debt which is also
subordinate (at least to the extent and in the manner as the Debt to be prepaid
or defeased, redeemed, repurchased or otherwise acquired is subordinate to the
Notes) in right of payment to the Notes; provided that such new subordinated
Debt provides for no payments of principal by way of sinking fund, mandatory
redemption or otherwise (including defeasance) by the Company (including,
without limitation, at the option of the holder thereof other than an option
given to a holder pursuant to an "asset sale" or "change of control" covenant
which is no more favorable to the holders of such Debt than the provisions
contained in corresponding Sections of this Indenture and such Debt provides
that the Company will not repurchase such Debt pursuant to such provisions prior
to the Company's repurchase of the Notes required to be repurchased by the
Company pursuant to corresponding Sections of this Indenture) prior to the final
scheduled maturity date of the Notes and the proceeds of such new subordinated
Debt are utilized for such purpose within 45 days of issuance or (b) Capital
Stock (other than Redeemable Stock); (ix) the repurchase of Debt subordinated to
the Notes pursuant to the provisions of any "change of control" covenant set
forth in the instrument governing such subordinated Debt; provided that such
repurchases will only be permitted if all of the terms and conditions in such
provisions have been fully complied with and such repurchases are made in
accordance with the terms of this Indenture and thereof, and provided further
that the Company has repurchased all Notes required to be repurchased by the
Company pursuant to Section 4.15 prior to the repurchase of any subordinated
Debt of the Company pursuant to the provisions of any "change of control"
covenant set forth in such Debt's governing instrument; (x) the purchase of Debt
of the Company which is subordinated to the Notes in anticipation of satisfying
sinking fund, principal installments or final maturity payments, in each case
within one year of the date of such purchase; (xi) Investments not described in
any other clause of this definition made after the date of this Indenture in an
aggregate amount (net of return of investment) not to exceed $7,500,000, which
amount may be increased by an amount equal to the lesser of (A) the excess, if
any, of $15,000,000 over the aggregate amount paid on redemption of shares of
Common Stock in accordance with the Management Redemption Offer within 60 days
of the Issue Date and (B) $5,000,000; provided that no Investment may be made as
described in this clause (xi) unless (a) such Investment is made in a Person
engaged primarily in a business that is the same
<PAGE>
-17-
as, similar or incidental to, or complementary with, a business in which the
Company and its Subsidiaries are substantially engaged on the Issue Date and (b)
immediately after giving effect to such Investment, the Company would be able to
incur at least $1.00 of Debt under certain sections of this Indenture; (xii) an
Investment consisting of the contribution of the Monessen Facility to a
partnership or other entity created for the purpose of effecting the sale of the
Monessen Section 29 Tax Credits; provided that the Company shall be the general
partner (or equivalent) of such entity, an affiliate of the Company shall
continue to operate the Monessen Facility, such contribution shall be credited
to the Company's capital account (or equivalent) of such entity at the fair
market value of the Monessen Facility and the other investor's interest in such
entity shall be redeemable by the Company following expiration of the Monessen
Section 29 Tax Credits; (xiii) an Investment by a Receivables Subsidiary
consisting of equity interests in a trust or other Person established by such
Receivables Subsidiary to effect a Receivables Transaction; and (xiv)
Investments made in Cash Equivalents and Consolidated Subsidiaries.
"Person" means an individual, a corporation, a partnership, a limited
------
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
--------------
"Post-Petition Interest" means, with respect to any Debt of any Person, all
----------------------
interest accrued or accruing on such Debt after the commencement of any
Insolvency or Liquidation Proceeding against such Person in accordance with and
at the contract rate (including, without limitation, any rate applicable upon
default) specified in the agreement or instrument creating, evidencing or
governing such Debt, whether or not, pursuant to applicable law or otherwise,
the claim for such interest is allowed as a claim in such Insolvency or
Liquidation Proceeding.
"Preferred Stock" means, with respect to any Person, any and all preferred or
---------------
preference stock (however designated) of such Person whether now outstanding or
issued after the date of this Indenture.
"principal," wherever used with reference to the Notes or any Note or any
---------
portion thereof, will be deemed to include "and premium, if any."
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Notes in the form set forth in Exhibit A(1).
"pro forma" means with respect to any calculation made or required to be made
---------
pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act, as determined by the
Board of Directors or the Chief Financial Officer of the Company in consultation
with its independent public accountants.
<PAGE>
-18-
"Property" of any person means all types of real, personal, tangible,
--------
intangible or mixed property owned by such person whether or not included in the
most recent consolidated balance sheet of such person and its Subsidiaries under
GAAP.
"Purchase Date" has the meaning provided in Section 4.16.
-------------
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified in
----------------------------- ---
Rule 144A under the Securities Act.
"Receivables Subsidiary" means a Subsidiary of the Company exclusively
----------------------
engaged in Receivables Transactions and activities related thereto; provided,
however, (i) that at no time shall the Company and its Subsidiaries have more
than one Receivables Subsidiary and (ii) all Debt or other borrowings of such
Subsidiary shall be Debt (x) as to which neither the Company nor any of its
other Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Debt), (b) is
directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes
the lender; (y) no default with respect to which would permit (upon notice,
lapse of time or both) any holder of any other Debt of the Company or any of its
Subsidiaries to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its stated maturity; and (z) as to
which the lenders (a) have acknowledged that they do not have recourse to the
holder of the Capital Stock of the debtor or (b) have been notified in writing
that they will not have any recourse to the stock or assets of the Company or
any of its other Subsidiaries.
"Receivables Transaction" means (i) the sale or other disposition to a third
-----------------------
party of accounts receivable or an interest therein, or (ii) the sale or other
disposition of accounts receivable or an interest therein to a Receivables
Subsidiary followed by a financing transaction in connection with such sale or
disposition of such accounts receivable (whether such financing transaction is
effected by such Receivables Subsidiary or by a third party to whom such
Receivables Subsidiary sells such accounts receivable or interests therein);
provided that in each of the foregoing, the Company or its Subsidiaries other
than the Receivables Subsidiary receive in cash at least 80% of the aggregate
principal amount of any accounts receivable financed in such transaction.
"Record Date" means, with respect to any Note, any of the Record Dates
-----------
specified in such Note, whether or not a Legal Holiday.
"Redemption Date," when used with respect to any Note to be redeemed, means
---------------
the date fixed for such redemption pursuant to this Indenture and the Notes.
"Redemption Price," when used with respect to any Note to be redeemed, means
----------------
the price fixed for such redemption pursuant to this Indenture and the Notes.
<PAGE>
-19-
"Redeemable Stock" means any class or series of Capital Stock of any Person
----------------
that by its terms or otherwise is (i) required to be redeemed, in whole or in
part, prior to the stated maturity of the Notes, (ii) redeemable at the option
of the holder thereof, upon the occurrence of any event or otherwise, at any
time prior to the stated maturity of the Notes or (iii) convertible into or
exchangeable for Capital Stock referred to in clause (i) or (ii) or Debt.
"Reference Period" means the four fiscal quarters for which financial
----------------
information is available (or was required to be made available) preceding the
date of a transaction giving rise to the need to make a financial calculation.
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration Rights Agreement" means the Registration Rights Agreement,
-----------------------------
dated as of December 1, 1997, by and among the Company, the Subsidiary
Guarantors and SBC Warburg Dillon Read Inc., as Initial Purchaser.
"Regulation S" means Regulation S under the Securities Act.
------------
"Representative" means the agent or representative in respect of any
--------------
Designated Senior Debt or Guarantor Senior Debt; provided that if, and for so
long as, any Designated Senior Debt or Guarantor Senior Debt lacks such a
representative, then the Representative for such Designated Senior Debt or
Guarantor Senior Debt, as the case may be, shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt or Guarantor Senior Debt in
respect of any Guarantor Senior Debt.
"Repurchase Date" has the meaning set forth in Section 4.15.
---------------
"Restricted Payment" means with respect to any Person (i) the declaration or
------------------
payment of any dividend or other distribution on account of any shares of such
Person's Capital Stock, (ii) any payment on account of the purchase, redemption,
retirement or other acquisition of (a) any shares of such Person's Capital Stock
or (b) any option, warrant or other right to acquire shares of such Person's
Capital Stock, (iii) any voluntary prepayment or defeasance, redemption,
repurchase or other acquisition or retirement for value of any Debt ranked
subordinate in right of payment to the Notes or (iv) any Investment.
Notwithstanding the foregoing, "Restricted Payment" shall not include any
Permitted Payment.
"Restricted Security" has the meaning assigned to such term in Rule 144(a)(3)
-------------------
under the Securities Act; provided that the Trustee shall be entitled to request
and conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Rule 144A" means Rule 144A under the Securities Act.
---------
<PAGE>
-20-
"S&P" means Standard and Poor's Corporation and its successors.
---
"Sale and Leaseback Transaction" means with respect to any Person an
------------------------------
arrangement with any bank, insurance company or other lender or investor or to
which such lender or investor is a party, providing for the leasing by such
Person or any of its Subsidiaries of any property of such Person or any of its
Subsidiaries which has been or is being sold or transferred by such Person or
such Subsidiary to such lender or investor or to any Person to whom funds have
been or are to be advanced by such lender or investor on the security of such
property.
"Saratoga" means Saratoga Partners III, LP.
--------
"SEC" means the United States Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
"Senior Debt" means, at any date, (a) all Obligations of the Company under
-----------
the New Credit Facilities; (b) all Obligations of the Company under Currency
Agreements and Interest Rate Agreements (including Post-Petition Interest); (c)
all Obligations of the Company under stand-by letters of credit; and (d) all
other Debt of the Company for borrowed money, including principal, premium, if
any, and interest (including Post-Petition Interest) on such Debt, unless the
instrument under which such Debt of the Company for money borrowed is Incurred
expressly provides that such Debt for money borrowed is not senior or superior
in right of payment to the Notes, and all renewals, extensions, modifications,
amendments or refinancings thereof. Notwithstanding the foregoing, Senior Debt
shall not include (a) to the extent that it may constitute Debt, any Obligation
for Federal, state, local or other taxes; (b) any Debt among or between the
Company and any Subsidiary of the Company, unless and for so long as such Debt
has been pledged to secure Obligations under the New Credit Facilities; (c) to
the extent that it may constitute Debt, any Obligation in respect of any trade
payable Incurred for the purchase of goods or materials, or for services
obtained, in the ordinary course of business; (d) Debt evidenced by the Notes
and the Subsidiary Guarantees; (e) Debt of the Company that is expressly
subordinate or junior in right of payment to any other Debt of the Company; (f)
to the extent that it may constitute Debt, any obligation owing under leases
(other than Capitalized Lease Obligations) or management agreements; and (g) any
obligation that by operation of law is subordinate to any general unsecured
obligations of the Company.
"Subordinated Debt" means any Debt of the Company which is expressly
-----------------
subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, any corporation or other
----------
entity of which a majority of the Capital Stock or other ownership interests
having ordinary voting power to elect
<PAGE>
-21-
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.
"Subsidiary Guarantee" means the Guarantee by any Subsidiary Guarantor of the
--------------------
Notes.
"Subsidiary Guarantor" means (i) each of the guarantors listed on the
--------------------
signature pages hereto, (ii) each of the Company's Subsidiaries which becomes a
guarantor of the Notes pursuant to the provisions of Section 4.20, and (iii)
each of the Company's Subsidiaries executing a supplemental indenture in which
such Subsidiary agrees to be bound by the terms of this Indenture; provided that
any person constituting a Subsidiary Guarantor as set forth above shall cease to
constitute a Subsidiary Guarantor when its respective Subsidiary Guarantee is
released in accordance with the terms thereof.
"Surviving person" has the meaning provided in Section 5.01.
----------------
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb),
---
as amended, as in effect on the date of this Indenture, except as otherwise
provided in Section 9.04.
"Trade Payables" means accounts payable or any other indebtedness or monetary
--------------
obligations to trade creditors created or assumed by the Company or any
Subsidiary of the Company in the ordinary course of business in connection with
the obtaining of materials or services.
"Trustee" means the party named as such in this Indenture until a successor
-------
replaces it in accordance with the provisions of this Indenture and thereafter
means such successor.
"Trust Officer" means any officer of the Trustee assigned by the Trustee to
-------------
administer this Indenture, or in the case of a successor trustee, an officer
assigned to the department, division or group performing the corporation trust
work of such successor and assigned to administer this Indenture.
"U.S. Government Obligations" means securities which are (i) direct
---------------------------
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case are not
callable or redeemable at the option of the issuer thereof.
"U.S. Legal Tender" means such coin or currency of the United States of
-----------------
America as at the time of payment shall be legal tender for the payment of
public and private debts.
<PAGE>
-22-
"U.S. Physical Notes" has the meaning provided in Section 2.01.
-------------------
"Wholly-Owned Subsidiary" means with respect to any Person a Subsidiary all
-----------------------
of the voting stock of which is owned directly or indirectly by such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such provision is
incorporated by reference in, and made a part of, this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the Subsidiary
Guarantors, if any, or any other obligor on the Notes or the Guarantees, if any.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular; and
<PAGE>
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(5) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
---------------
The Initial Notes, the notation thereon relating to the Guarantees, if any,
and the Trustee's certificate of authentication shall be substantially in the
form of Exhibit A(1) hereto. The Exchange Notes, the notation thereon relating
------------
to the Guarantees, if any, and the Trustee's certificate of authentication shall
be substantially in the form of Exhibit A(2) hereto. The Notes may have
------------
notations, legends or endorsements required by law, stock exchange rule or
depository rule or usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them. Each Note shall be
dated the date of its issuance.
The terms and provisions contained in the Notes and the Guarantees, if any,
annexed hereto as Exhibits A(1) and A(2) shall constitute, and are hereby
------------- ----
expressly made, a part of this Indenture and, to the extent applicable, the
Company, the Subsidiary Guarantors, if any, and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
to be bound thereby.
Notes offered and sold in reliance on Rule 144A or in offshore transactions
in reliance of Regulation S shall be issued initially in the form of one or more
permanent global Notes in registered form, substantially in the form set forth
in Exhibit A(1) (a "Global Note"), deposited with the Trustee, as custodian for
-----------
the Depository, and shall bear the legend set forth in Exhibit B, duly executed
---------
by the Company and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of any Global Note may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depository, as hereinafter provided.
Notes offered and sold in reliance on any other exemption from registration
under the Securities Act other than as described in the preceding paragraph
shall be issued, and Notes offered and sold in reliance on Rule 144A may be
issued, in the form of permanent certificated Notes in registered form, in
substantially the form set forth in Exhibit A(1) (the "U.S. Physical Notes").
------------ -------------------
Notes offered and sold in offshore transactions in reliance on Regulation S may
also be issued in the form of permanent certificated Notes in registered form in
substantially the form set forth in Exhibit A(1) (the "Offshore Physical
------------ -----------------
Notes"). The Offshore Physical Notes and the U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes."
--------------
<PAGE>
-24-
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
-----------------------------
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Notes for the Company by manual or facsimile
signature. Each Subsidiary Guarantor shall execute the Guarantee in the manner
set forth in Section 11.09.
If an Officer or Assistant Secretary whose signature is on a Note was an
Officer or Assistant Secretary at the time of such execution but no longer holds
that office or position at the time the Trustee authenticates the Note, the
Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate (i) Initial Notes for original issue in the
aggregate principal amount not to exceed $175,000,000 and (ii) Exchange Notes
from time to time only in exchange for a like principal amount of Initial Notes,
in each case upon a written order of the Company in the form of an Officers'
Certificate of the Company. Each such written order shall specify the amount of
Notes to be authenticated and the date on which the Notes are to be
authenticated, whether the Notes are to be Initial Notes or Exchange Notes and
whether the Notes are to be issued as Physical Notes or Global Notes or such
other information as the Trustee may reasonably request. In addition, with
respect to authentication pursuant to clause (ii) of the first sentence of this
paragraph, the first such written order from the Company shall be accompanied by
an Opinion of Counsel of the Company in a form reasonably satisfactory to the
Trustee to the effect that the issuance of the Exchange Notes does not give rise
to an Event of Default, complies with this Indenture and has been duly
authorized by the Company. The aggregate principal amount of Notes outstanding
at any time may not exceed $175,000,000, except as provided in Section 2.07.
The Trustee may appoint an authenticating agent (the "Authenticating Agent")
--------------------
reasonably acceptable to the Company to authenticate Notes. Unless otherwise
provided in the appointment, an Authenticating Agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such Authenticating
Agent. An Authenticating Agent has the same rights as an Agent to deal with the
Company and Affiliates of the Company.
<PAGE>
-25-
The Notes shall be issuable in fully registered form only, without coupons,
in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be located in the
Borough of Manhattan in the City of New York, State of New York) where (a) Notes
may be presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying
- ----------- ------
Agent") and (c) notices and demands to or upon the Company in respect of the
- -----
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and of their transfer and exchange. The Company, upon prior written
notice to the Trustee, may have one or more co-Registrars and one or more
additional paying agents reasonably acceptable to the Trustee. The term "Paying
Agent" includes any additional Paying Agent. Neither the Company nor any
Affiliate of the Company may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with any Agent
not a party to this Indenture, which agreement shall incorporate the provisions
of the TIA and implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee, in advance, of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying Agent and
agent for service of demands and notices in connection with the Notes, until
such time as the Trustee has resigned or a successor has been appointed. The
Paying Agent or Registrar may resign upon 30 days prior written notice to the
Company.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to agree
in writing that, subject to Articles Ten and Eleven, each Paying Agent shall
hold in trust for the benefit of the Holders or the Trustee all assets held by
the Paying Agent for the payment of principal of, or interest on, the Notes
(whether such assets have been distributed to it by the Company or any other
obligor on the Notes), and the Company and the Paying Agent shall notify the
Trustee in writing of any Default by the Company (or any other obligor on the
Notes) in making any such payment. The Company at any time may require a Paying
Agent to distribute all assets held by it to the Trustee and account for any
assets disbursed and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
<PAGE>
-26-
SECTION 2.05. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of Noteholders.
If the Trustee is not the Registrar, the Company shall furnish or cause the
Registrar to furnish to the Trustee as of each Record Date and before each
related Interest Payment Date and at such other times as the Trustee may request
in writing a list as of such date and in such form as the Trustee may reasonably
require of the names and addresses of Noteholders, which list may be
conclusively relied upon by the Trustee.
The registered Holder of any Note, as shown on the Noteholder list maintained
by the Registrar, shall be deemed and regarded as the absolute owner thereof for
all purposes, whether or not such Note is overdue, and payment of or on account
of any of the principal of or interest on such Note shall be made only to or
upon the order of the registered Holder thereof or his duly authorized attorney;
but such registration may be changed as herein expressly provided. All such
payments shall be valid and effectual to satisfy and discharge the liability
upon such Note to the extent of the sum or sums so paid. Neither the Company
nor the Trustee, nor any agent for either, shall be bound or otherwise obligated
by any notice or knowledge indicating that any Person other than the registered
Holder shown on the Noteholder list is the Holder of any Note except for a
formal change of registration by transfer or otherwise as provided herein.
SECTION 2.06. Transfer and Exchange.
---------------------
Subject to the provisions of Sections 2.15 and 2.16, when Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer of
such Notes or to exchange such Notes for an equal principal amount of Notes of
other authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transaction are met; provided, however, that the Notes presented or surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Registrar or co-Registrar, duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit registrations of transfer and exchanges,
the Company shall issue and execute and the Trustee shall authenticate Notes at
the Registrar's or co-Registrar's request. No service charge shall be made to a
Noteholder for any registration of transfer or exchange. The Company may
require from such Noteholder payment of a sum sufficient to cover any transfer
tax or similar governmental charge payable in connection therewith (other than
any such transfer taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Section 2.10, 3.06, 4.15, 4.16 or 9.06, in which event the
Company shall be responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to register the transfer
of or exchange of any Note (i) during a period beginning at the opening of
business 15 days before the mailing
<PAGE>
-27-
of a notice of redemption of Notes and ending at the close of business on the
day of such mailing and (ii) selected for redemption in whole or in part
pursuant to Article Three, except the unredeemed portion of any Note being
redeemed in part.
Any Holder of a Global Note shall, by acceptance of such Global Note, agree
that transfers of beneficial interests in such Global Note may be effected only
through a book entry system maintained by the Holder of such Global Note (or its
agent), and that ownership of a beneficial interest in the Note shall be
required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or if the Holder of a Note
claims that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and execute and the Trustee shall authenticate a replacement Note if
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an affidavit of lost certificate and an indemnity bond
or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Note is replaced. The Company may charge such
Holder for its reasonable out-of-pocket expenses in replacing a Note, including
reasonable fees and expenses of the Trustee and counsel and the Trustee may
charge the Company for the Trustee's reasonable out-of-pocket expenses in
replacing such Note. Every replacement Note shall constitute an additional
Obligation of the Company.
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that have been authenticated
by the Trustee except those cancelled by it, those delivered to it for
cancellation and those described in this Section as not outstanding. Subject to
the provisions of Section 2.09, a Note does not cease to be outstanding because
the Company, any Subsidiary Guarantor or any of their respective Affiliates
holds the Note.
If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note
surrendered for replacement), it ceases to be outstanding unless the Trustee
receives proof satisfactory to it that the replaced Note is held by a bona fide
purchaser. A mutilated Note ceases to be outstanding upon surrender of such
Note and replacement thereof pursuant to Section 2.07.
If on a Redemption Date or the Maturity Date the Paying Agent holds U.S.
Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
<PAGE>
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SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of Notes
have concurred in any direction, waiver, consent or notice, Notes owned by the
Company, any Subsidiary Guarantor or any of their respective Affiliates shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Trust Officer of the Trustee
actually knows are so owned shall be so considered. The Company shall notify
the Trustee, in writing, when it or any of its Affiliates repurchases or
otherwise acquires Notes, and of the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the Company may prepare and
the Trustee shall authenticate temporary Notes upon receipt of a written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of temporary Notes to be authenticated and
the date on which the temporary Notes are to be authenticated, and shall direct
the Trustee to authenticate such Notes and certify that all conditions precedent
to the issuance of such Notes contained herein have been complied with.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company and the Trustee consider appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Notes in exchange for temporary Notes.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee, or at the
direction of the Trustee, the Registrar or the Paying Agent, and no one else,
shall cancel and, at the written direction of the Company, shall (subject to the
record-retention requirements of the Exchange Act) dispose of all Notes
surrendered for registration of transfer, exchange, payment or cancellation.
Subject to Section 2.07, the Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation. If the Company
or any Subsidiary Guarantor shall acquire any of the Notes, such acquisition
shall not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surrendered to the
Trustee for cancellation pursuant to this Section 2.11.
<PAGE>
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SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest, plus (to the extent lawful) any interest payable on the
defaulted interest to the Persons who are Holders on a subsequent special record
date, which date shall be the fifteenth day next preceding the date fixed by the
Company for the payment of defaulted interest or the next succeeding Business
Day if such date is not a Business Day. At least 15 days before the subsequent
special record date, the Company shall mail to each Holder, with a copy to the
Trustee, a notice that states the subsequent special record date, the payment
date and the amount of defaulted interest, and interest payable on such
defaulted interest, if any, to be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use one or more "CUSIP" numbers, and if
so, the appropriate CUSIP number(s) shall be included in all notices of
redemption or exchange as a convenience to Holders; provided that any such
notice may state that no representation is made by the Trustee as to the
correctness or accuracy of any CUSIP number(s) printed in the notice or on the
Notes, and that reliance may be placed only on the other identification numbers
printed on the Notes. The Company shall promptly notify the Trustee of any
change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
-----------------
Prior to 10:00 a.m, New York City time, on each Interest Payment Date and on
the Maturity Date, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Paying Agent to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for
Global Notes.
---------------------------
(a) Any Global Note initially shall (i) be registered in the name of the
Depository or the nominee of such Depository, (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Exhibit
B.
Members of, or participants in, the Depository ("Agent Members") shall have
-------------
no rights under this Indenture with respect to any Global Note held on their
behalf by the Depository, or the Trustee as its custodian, or under any Global
Note, and the Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the
<PAGE>
-30-
Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of any Global Note shall be limited to transfers in whole, but
not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in a Global Note may be transferred or exchanged
for Physical Notes in accordance with the rules and procedures of the Depository
and the provisions of Section 2.16. In addition, Physical Notes shall be
transferred to all beneficial owners in exchange for their beneficial interests
in a Global Note if (i) the Depository notifies the Company that it is unwilling
or unable to continue as Depository for such Global Note and a successor
depositary is not appointed by the Company within 90 days of such notice or (ii)
an Event of Default has occurred and is continuing and the Registrar has
received a request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in a Global Note to beneficial owners pursuant to paragraph
(b), the Registrar shall (if one or more Physical Notes are to be issued)
reflect on its books and records the date and a decrease in the principal amount
of such Global Note in an amount equal to the principal amount of the beneficial
interest in such Global Note to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Physical Notes of
like tenor and amount.
(d) In connection with the transfer of an entire Global Note to beneficial
owners pursuant to paragraph (b), such Global Note shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate and deliver, to each beneficial owner identified
by the Depository in exchange for its beneficial interest in such Global Note,
an equal aggregate principal amount of Physical Notes of authorized
denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b) or (c)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.16, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A.
(f) The Holder of any Global Note may grant proxies and otherwise authorize
any person, including Agent Members and persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.
SECTION 2.16. Special Transfer Provisions.
---------------------------
<PAGE>
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(a) Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
--------------------------------------------------------------------
Persons. The following provisions shall apply with respect to the registration
- -------
of any proposed transfer of a Note constituting a Restricted Security to any
Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after December
1, 1999 and the transferor certifies that the Restricted Security was not
acquired from the Company or Affiliate of the Company less than two years
prior to the date of the proposed transfer or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto or
(2) in the case of a transfer to a Non-U.S. Person, the proposed transferor
has delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of the relevant Global Note in an amount equal
to the principal amount of the beneficial interest in such Global Note to be
transferred, and (b) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect
-----------------
to the registration of any proposed transfer of a Note constituting a Restricted
Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has
<PAGE>
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determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in a Global Note, upon receipt by the Registrar of
instructions given in accordance with the Depository's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of such Global Note in an amount
equal to the principal amount of the Physical Notes to be transferred, and
the Trustee shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the registration of transfer, exchange
------------------------
or replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
registration of transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) the circumstance contemplated by paragraph (a)(i)(x)
of this Section 2.16 exist or (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act.
(d) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each Holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.15 or this Section 2.16 for a
period of three years. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
<PAGE>
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If the Company elects to redeem Notes pursuant to Paragraph Six of the
Notes, it shall notify both the Trustee and the Paying Agent in writing of the
Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.01 at
least 45 days before the Redemption Date (unless a shorter notice period shall
be satisfactory to the Trustee, as evidenced in a writing signed on behalf of
the Trustee), together with an Officers' Certificate and Opinion of Counsel
stating that such redemption shall comply with the conditions contained herein
and in the Notes.
SECTION 3.02. Selection of Notes To Be Redeemed.
---------------------------------
If fewer than all of the Notes are to be redeemed, the Trustee shall select
the Notes to be redeemed on a pro rata basis, by lot or in such other fair and
appropriate manner chosen at the discretion of the Trustee and, if the Notes are
listed on any securities exchange, by a method that complies with the
requirements of such exchange; provided, however, that if partial redemption is
made with the net proceeds of one or more issuances of Common Stock (other than
Redeemable Stock) prior to December 1, 2000, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis
unless such method is otherwise prohibited. The Trustee shall make the
selection from the Notes outstanding and not previously called for redemption
and shall promptly notify the Company in writing of the Notes selected for
redemption and, in the case of any Note selected for partial redemption, the
principal amount thereof to be redeemed. Notes in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions
(equal to $1,000 or any integral multiple thereof) of the principal of Notes
that have denominations larger than $1,000. Provisions of this Indenture that
apply to Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date, the
Company shall mail or cause to be mailed a notice of redemption by first class
mail, postage prepaid, to each Holder whose Notes are to be redeemed, with a
copy to the Trustee and any Paying Agent.
Each notice for redemption shall identify the Notes to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
<PAGE>
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(4) the subparagraph of the Notes pursuant to which such redemption is
being made;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price plus accrued interest, if any;
(6) that, unless (a) the Company defaults in making the redemption
payment or (b) such redemption payment is prohibited pursuant to Article
Ten or Eleven or otherwise, interest on Notes called for redemption ceases
to accrue on and after the Redemption Date, and the only remaining right of
the Holders of such Notes is to receive payment of the Redemption Price
plus accrued interest, if any, upon surrender to the Paying Agent of the
Notes redeemed;
(7) if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 or any integral multiple thereof) of such
Note to be redeemed and that, on or after the Redemption Date, and upon
surrender of such Note, a new Note or Notes in the aggregate principal
amount equal to the unredeemed portion thereof will be issued; and
(8) if fewer than all the Notes are to be redeemed, the identification
of the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become due and payable on the Redemption Date and at the
Redemption Price plus accrued interest, if any. Upon surrender to the Trustee
or Paying Agent, such Notes called for redemption, unless prohibited pursuant
to Article Ten or Eleven or otherwise pursuant to this Indenture, shall be paid
at the Redemption Price (which shall include accrued interest thereon to the
Redemption Date), but installments of interest, the maturity of which is on or
prior to the Redemption Date, shall be payable to Holders of record at the close
of business on the relevant record dates referred to in the Notes.
SECTION 3.05. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company shall deposit with the Paying
Agent in immediately available funds U.S. Legal Tender sufficient to pay the
Redemption Price plus accrued interest, if any, of all Notes or portions thereof
to be redeemed on that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not required for that
purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
<PAGE>
-35-
If the Company complies with the preceding paragraph and payment of the
Notes is not prohibited under Article Ten or Eleven or otherwise, then, unless
the Company defaults in the payment of such Redemption Price plus accrued
interest, if any, interest on the Notes to be redeemed will cease to accrue on
and after the applicable Redemption Date, whether or not such Notes are
presented for payment.
SECTION 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in part, the Company shall
issue and execute, and the Trustee shall authenticate for the Holder, a new Note
or Notes equal in principal amount to the unredeemed portion of the Note
surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes.
----------------
The Company shall pay the principal of and interest on the Notes on the
dates and in the manner provided in the Notes and in this Indenture. An
installment of principal of or interest on the Notes shall be considered paid on
the date it is due if the Trustee or Paying Agent (other than the Company or an
Affiliate of the Company) holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments are lawful, interest on
overdue principal and on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the rate borne by the
Notes. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under Section
2.03. The Company shall give prior written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
<PAGE>
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presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 12.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five, the Company shall do or
cause to be done, at its own cost and expense, all things necessary to preserve
and keep in full force and effect its corporate existence and the corporate
existence of each of its Subsidiaries in accordance with the respective
organizational documents of each such Subsidiary and the material rights
(charter and statutory) of the Company and each such Subsidiary; provided,
however, that the Company shall not be required to preserve, with respect to
itself, any material right and, with respect to any of its Subsidiaries, any
such existence or material right, if the Board of Directors of the Company shall
determine in good faith that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon it or any of its Subsidiaries or
its Properties or any of its Subsidiaries' Properties and (ii) all material
lawful claims for labor, materials and supplies that, if unpaid, might by law
become a Lien upon its Properties or any of its Subsidiaries' Properties,
except, in each case, as would not be, in the aggregate, reasonably likely to
have a material adverse effect on the business and financial condition of the
Company and its Subsidiaries, taken as a whole; provided, however, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings properly
instituted and diligently conducted for which adequate reserves, to the extent
required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
----------------------------
(a) The Company shall, and shall cause each of its Subsidiaries to,
maintain its Properties in good working order and condition (subject to ordinary
wear and tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively conduct and carry
on its business, unless the failure to do so, in each case, would not be, in the
aggregate, reasonably likely to have a material adverse effect on the business
and financial condition of the Company and its Subsidiaries, taken as a whole;
provided, however, that nothing in this Section 4.05 shall prevent the Company
or any of its Subsidiaries from discontinuing the operation and maintenance of
any of its Properties if such discontinuance is, in the good faith
<PAGE>
-37-
judgment of the Board of Directors or other governing body of the Company or the
Subsidiary concerned, as the case may be, desirable in the conduct of its
businesses and is not disadvantageous in any material respect to the Holders.
(b) The Company shall maintain insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the good faith judgment
of the Company, are adequate and appropriate for the conduct of the business of
the Company and its Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Company, for
companies similarly situated in the industry, except for any omissions thereof
which would not be, in the aggregate, reasonably likely to have a material
adverse effect on the business and financial condition of the Company and its
Subsidiaries, taken as a whole.
SECTION 4.06. Compliance Certificate;
Notice of Default.
------------------------
(a) The Company shall deliver to the Trustee, on or before 90 days after
the end of the Company's fiscal year and on or before 45 days after the end of
each of the first, second and third fiscal quarters in each year, an Officers'
Certificate which complies with TIA (S) 314(a)(4) stating that a review of its
activities during the preceding fiscal quarter or fiscal year (as the case may
be) has been made under the supervision of the signing Officers with a view to
determining whether it has kept, observed, performed and fulfilled its
Obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of such Officer's knowledge the
Company during such preceding fiscal year or fiscal quarter has kept, observed,
performed and fulfilled each and every such covenant and the Obligations
contained in this Indenture and the Notes and no Default or Event of Default
occurred during such year or quarter and at the date of such certificate there
is no Default or Event of Default that has occurred and is continuing or, if
such signers do know of such Default or Event of Default, the certificate shall
describe the Default or Event of Default and its status with particularity. For
purposes of this paragraph (a), compliance with this Indenture shall be
determined without regard to any period of grace or requirement of notice
provided under this Indenture The Officers' Certificate shall also notify the
Trustee should the Company elect to change the manner in which it fixes its
fiscal year end.
(b) So long as not contrary to then current recommendations of the American
Institute of Certified Public Accountants, the annual financial statements
delivered pursuant to Section 4.08 shall be accompanied by a written report of
the Company's independent accountants (who shall be a firm of established
national reputation) that in conducting their audit of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article Four or Five or Section 6.01
insofar as they relate to
<PAGE>
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accounting matters or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any person for any failure to obtain knowledge of any such violation.
(c) (i) If any Default or Event of Default has occurred and is continuing
or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a
claimed Default under this Indenture or the Notes, the Company shall deliver to
the Trustee, at its address set forth in Section 12.02 hereof, by registered or
certified mail or by telegram, telex or facsimile transmission followed by hard
copy by registered or certified mail an Officers' Certificate specifying such
event, notice or other action (including any action the Company is taking or
proposes to take in respect thereof) within thirty days of such occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall, and shall cause each of its Subsidiaries to, comply with
all applicable statutes, rules, regulations, orders and restrictions of the
United States of America, all states and municipalities thereof, and of any
governmental department, commission, board, regulatory authority, bureau, agency
and instrumentality of the foregoing, in respect of the conduct of its
businesses and the ownership of its properties, except for such noncompliances
as are not in the aggregate reasonably likely to have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
SECTION 4.08. SEC Reports.
-----------
(a) The Company shall file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is subject to such filing requirements so long
as the SEC will accept such filings. The Company (at its own expense) shall
file with the Trustee within 15 days after it files them with the SEC, copies of
the quarterly and annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company files with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA (S) 314(a).
(b) At the Company's expense, regardless of whether the Company is required
to furnish such reports and other information referred to in paragraph (a) above
to its stockholders pursuant to the Exchange Act, the Company shall cause such
reports and other information to be mailed to the Holders at their addresses
appearing in the register of Notes maintained by the Registrar within 15 days
after it files them with the SEC.
<PAGE>
-39-
(c) The Company shall provide (1) to any Holder any information reasonably
requested by such Holder concerning the Company (including financial statements)
necessary in order to permit such Holder to sell or transfer Notes in compliance
with Rule 144A under the Securities Act and (2) to any prospective purchaser of
the Notes who requests such information in writing, any information reasonably
requested by such prospective investor the delivery of which to a Holder would
be consistent with this Section 4.08.
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
----------------------------
The Company and each Subsidiary Guarantor covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive the
Company or any such Subsidiary Guarantor, as the case may be, from paying all or
any portion of the principal of or interest on the Notes or performing its
Guarantee, as the case may be and as contemplated herein, wherever enacted, now
or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
the Company and each Subsidiary Guarantor, if any, hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment unless (a) at the time of
such Restricted Payment or after giving effect thereto, no Event of Default, and
no event that through the passage of time or the giving of notice, or both,
would become an Event of Default, will have occurred and be continuing, (b)
after giving effect thereto, the Company could Incur at least $1.00 of Debt
pursuant to the provisions of the second paragraph of Section 4.12 and (c) after
giving effect thereto, the aggregate amount of all Restricted Payments made by
the Company and its Subsidiaries after the Issue Date will not exceed the sum
(without duplication) of: (i) 50% of Consolidated Net Income of the Company
accrued for the period (taken as one accounting period) commencing with January
1, 1998, and ending with the first full fiscal quarter ended immediately prior
to the date of such calculation; provided that if Consolidated Net Income for
such period is less than zero, then minus 100% of the amount of such loss; plus
(ii) 50% of that portion of the net after tax cash proceeds from the sale,
transfer, carryover, lease or other disposition of the Monessen Facility that is
directly attributable to the Monessen Section 29 Tax Credits; plus (iii) the
aggregate net cash proceeds received by the Company from the issuance or sale
(other than to a Subsidiary) of its Capital Stock (other than Redeemable Stock)
after the Issue Date
<PAGE>
-40-
(including Capital Stock (other than Redeemable Stock) issued upon conversion
of, or in exchange for, securities other than its Capital Stock), and warrants
and other rights to purchase (not including any such warrants or rights to
purchase which are redeemable at the option of the holder thereof) its Capital
Stock (other than Redeemable Stock); plus (iv) $5,000,000. Notwithstanding the
foregoing, the Company may make payment of a dividend or other distribution on
account of its shares of Capital Stock within 90 days of the declaration thereof
if such declaration was permitted under the provisions of this Section 4.10.
SECTION 4.11. Limitation on Transactions
with Affiliates.
------------------------------
Neither the Company nor any of its Subsidiaries shall directly or
indirectly enter into any transaction (including, without limitation, the sale,
purchase or lease of any assets or properties or the rendering of any services)
with any Affiliate of the Company or direct or indirect holder of 5% or more of
any class of Capital Stock of the Company or any such Affiliate (other than a
Wholly-Owned Subsidiary of the Company) except for transactions made in good
faith the terms of which are fair and reasonable to the Company or such
Subsidiary, as the case may be, and are at least as favorable as the terms which
could be obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's length basis with Persons who are not
such a holder or Affiliate; provided that any such transaction will be
conclusively deemed to be on terms which are fair and reasonable to the Company
or any of its Subsidiaries and on terms which are at least as favorable as the
terms which could be obtained on an arm's length basis with Persons who are not
such a holder or Affiliate if such transaction is approved by a majority of the
Company's disinterested directors and; provided, further, that with respect to
any transaction or series of related transactions the aggregate amount of which
is in excess of $10,000,000, in addition to approval of its board of directors,
the Company will obtain a written opinion of an Independent Financial Advisor
stating that the terms of such transaction are fair to the Company or its
Subsidiary, as the case may be, from a financial point of view. This Section
4.11 will not apply to (a) the payment of reasonable and customary regular fees
to directors of the Company, (b) any Permitted Payment and any Restricted
Payment not otherwise prohibited by this Indenture or (c) transactions between a
Receivables Subsidiary and any Person as part of a Receivables Transaction, but
only to the extent such transactions are solely in connection with the
Receivables Transaction.
SECTION 4.12. Limitation on Debt.
------------------
The Company shall not, and shall not permit its Subsidiaries to, directly
or indirectly Incur any Debt (including Acquisition Debt), except (i) Debt
outstanding (or, in the case of Term Loan A under the New Credit Facilities,
committed) on the Issue Date (after giving effect to the use of proceeds of
issuance of the Notes), including the term loans under the New Credit
Facilities,
<PAGE>
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but not including Debt described in clauses (iii) and (iv) below; (ii) Debt
evidenced by the Notes and the Subsidiary Guarantees; (iii) Debt of Koppers
Australia, in an aggregate principal amount not to exceed the Australian dollar
equivalent of $40,000,000 at the time such Debt is initially issued, in the form
of term loans under the New Credit Facilities; (iv) Debt of the Company or
Koppers Australia Incurred under the revolving credit facilities provided for in
the New Credit Facilities, including (without duplication) any such Debt in
respect of letters of credit (not including the letters of credit described in
clause (v) below), in an aggregate principal amount not to exceed the sum of 80%
of accounts receivable (reduced as necessary to reflect the disposition of any
such accounts receivable in a Receivables Transaction) and 50% of inventory as
shown on the Company's consolidated balance sheet for the immediately preceding
fiscal quarter for which financial statements are available; (v) Debt in respect
of letters of credit with an aggregate face amount not to exceed the Australian
dollar equivalent of $60,000,000 at the time such letters of credit are issued
at any one time outstanding issued to provide support for loans to Koppers
Australia; (vi) Debt in respect of letters of credit issued in the ordinary
course of business not to exceed $15,000,000 in aggregate amount at any one time
outstanding; (vii) Debt of any Subsidiary to the Company or any Wholly-Owned
Subsidiary; (viii) Debt secured by Liens described in (x) and (xv) of the
definition of Permitted Liens in an aggregate amount not to exceed $5,000,000 at
any one time outstanding and refinancings thereof provided that the amount of
such Debt is not increased; (ix) Debt issued in exchange for, or the proceeds of
which are used to refinance, outstanding or committed Debt of the Company or any
of the Notes in an amount (or, if such new Debt, is issued at a price less than
the principal amount thereof, with an original issue price) not to exceed the
amount so exchanged or refinanced (plus accrued interest, fees, expenses and
other obligations related thereto); provided that if the Debt to be exchanged or
refinanced by its terms ranks subordinate in right of payment to the Notes, (1)
the Debt exchanged for, or the proceeds of which are used to refinance, such
Debt is also subordinate to the Notes (at least to the extent and in the manner
that the Debt to be exchanged or refinanced is subordinate to the Notes) in
right of payment to the Notes and (2) no payments of principal of such Debt by
way of sinking fund, mandatory redemption, mandatory repurchase or otherwise
(including defeasance) may be made by the Company (including, without
limitation, at the option of the holder thereof, other than an option given to a
holder pursuant to an "asset sale" or "change of control" covenant which is no
more favorable to the holders of such Debt than the corresponding provisions
contained in this Indenture, and such Debt provides that the Company will not
repurchase such Debt pursuant to such provisions prior to the Company's
repurchase of the Notes required to be repurchased by the Company pursuant to
the corresponding provisions contained in this Indenture) at any time prior to
the final scheduled maturity date of the Notes; provided, further, that (A) if
any scheduled mandatory principal payment of the Debt being exchanged for or
refinanced has a due date after December 1, 2007, the corresponding scheduled
mandatory payment of the Debt issued in exchange for, or to refinance such Debt,
will not have a due date on or prior to December 1, 2007, and (B) in no event
may Debt of the Company or a Subsidiary of the Company be refinanced by means of
Debt of any other Subsidiary of the Company pursuant to this clause (ix); (x)
Debt under Currency Agreements and Interest Rate
<PAGE>
-42-
Agreements; (xi) Debt of Hickson outstanding from time to time in an aggregate
principal amount not to exceed the Australian dollar equivalent of $10,000,000
at the time such Debt is issued, to the extent such Debt could be Incurred
pursuant to the provisions of the following paragraph as if Hickson were a
Subsidiary Guarantor; (xii) Asset Dispositions in the form of Receivables
Transactions; (xiii) Guarantees of Debt under the New Credit Facilities
otherwise permitted under this Indenture; and (xiv) to the extent not otherwise
provided for in clauses (i) through (xiii) above, Debt of the Company in an
aggregate outstanding principal amount not to exceed $5,000,000 at any one time
outstanding.
Notwithstanding the provisions set forth in the preceding paragraph, the
Company and the Subsidiary Guarantors may Incur Debt, including Acquisition
Debt, if on the Determination Date and after giving effect to the Incurrence of
such Debt and the application of the proceeds therefrom, the Consolidated Fixed
Charge Ratio for the Reference Period immediately preceding the Determination
Date is greater than 2.0 to 1.
SECTION 4.13. Limitation on Payment Restrictions
Affecting Subsidiaries.
--------------------------------------
The Company shall not, and shall not permit any Subsidiary to, create,
assume or otherwise cause or suffer to exist or to become effective any
consensual encumbrance or restriction on the ability of any Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock; (b) make
payments in respect of any Debt owed to the Company or any of the Company's
Subsidiaries; (c) make loans or advances to the Company or any of the Company's
Subsidiaries; or (d) transfer any of its property to the Company or any of the
Company's Subsidiaries other than (i) encumbrances and restrictions included (1)
in this Indenture or (2) in any agreement in effect on the date of this
Indenture (including without limitation the New Credit Facilities as in effect
on the Issue Date) or (3) in any partial or total initial or successive
refinancing, refunding or replacement of any agreement referred to in clause
(2); provided that any encumbrances or restrictions in any such refinancing,
refunding, replacement, amendment, modification or supplement are not materially
less favorable to the Company than those in such agreement in effect on the date
of this Indenture; (ii) customary provisions contained in agreements with
respect to Liens applicable to the assets subject to such Liens; (iii)
encumbrances or restrictions binding upon any Person at the time such Person
becomes a Subsidiary of the Company, provided that such encumbrances or
restrictions were not incurred in anticipation of such Person becoming a
Subsidiary of the Company; or (iv) restrictions applicable to a Receivables
Subsidiary arising from a Receivables Transaction. This section will not
prevent the Company from Incurring or suffering to exist any Lien which is
permitted by Section 4.18.
SECTION 4.14. Limitation on Additional Senior
Subordinated Indebtedness.
--------------------------------
<PAGE>
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The Company shall not, directly or indirectly, Incur any Debt that by its
terms would expressly rank senior in right of payment to the Notes and expressly
rank subordinate in right of payment to any other Debt of the Company.
The Company shall not permit any Subsidiary Guarantor to, and no Subsidiary
Guarantor shall, directly or indirectly, Incur any Debt that by its terms would
expressly rank senior in right of payment to the Subsidiary Guarantee of such
Subsidiary Guarantor and expressly rank subordinate in right of payment to any
Guarantor Senior Debt of such Subsidiary Guarantor.
SECTION 4.15. Limitation on Change of Control.
-------------------------------
(a) Upon a Change of Control, each Holder of the Notes will have the right
to require that the Company repurchase such Holder's Notes at a repurchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase, in accordance with the terms
contemplated in the following paragraph (b) (the "Change of Control Offer").
-----------------------
(b) Within 30 days following any Change of Control, the Company shall mail
a notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to repurchase such Holder's Notes at a repurchase price in cash equal to 101% of
the principal amount the plus accrued and unpaid interest, if any, to the date
of repurchase (the "Change of Control Purchase Price"); (2) the circumstances
--------------------------------
and relevant facts regarding such Change of Control (including information with
respect to pro forma historical income, cash flow and capitalization after
giving effect to such Change of Control); (3) the repurchase date (which will be
not earlier than 30 days or later than 60 days from the date such notice is
mailed) (the "Repurchase Date"); (4) that any Note not tendered will continue to
---------------
accrue interest; (5) that any Note accepted for payment pursuant to the Change
of Control Offer will cease to accrue interest after the Repurchase Date, (6)
that holders electing to have a Note purchased pursuant to a Change of Control
Offer will be required to surrender the Note, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Note completed, to the paying
agent at the address specified in the notice prior to the close of business on
the Repurchase Date; (7) that holders will be entitled to withdraw their
election if the paying agent receives, not later than the close of business on
the third Business Day (or such shorter periods as may be required by applicable
law) preceding the Repurchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal amount of Notes the
holder delivered for purchase, and a statement that such holder is withdrawing
his election to have such Notes purchased; and (8) that holders which elect to
have their Notes purchased only in part will be issued new Notes in a principal
amount equal to the unpurchased portion of the Notes surrendered.
<PAGE>
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(c) On the Repurchase Date, the Company shall (i) accept for payment Notes
or portions thereof tendered pursuant to the Change of Control Offer, (ii)
deposit with the Trustee money sufficient to pay the purchase price of all Notes
or portions thereof so tendered and (iii) deliver or cause to be delivered to
the Trustee Notes so accepted together with an officers' certificate stating the
Notes or portions thereof tendered to the Company. The Trustee will promptly
mail to the holders of Note so accepted payment in an amount equal to the
purchase price, and prompt authenticate and mail to such holders a new Note in a
principal amount equal to any unpurchased portion of the Note surrendered. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Repurchase Date.
(d) If the New Credit Facilities are in effect, or any amounts are owing
thereunder or in respect thereof, at the time of the occurrence of a Change of
Control, prior to the mailing of the notice to holders described in the
preceding paragraph (c), but in any event within 20 days following any Change of
Control, the Company shall (i) repay in full all obligations under or in respect
of the New Credit Facilities or offer to repay in full all obligations under or
in respect of the New Credit Facilities and repay the obligations under or in
respect of the New Credit Facilities of each lender who has accepted such offer
or (ii) obtain the requisite consent under the New Credit Facilities to permit
the repurchase of the Notes as set forth above. The Company must first comply
with the preceding sentence before it shall be required to purchase Notes in the
event of a Change of Control; provided that the Company's failure to comply with
the preceding sentence shall constitute an Event of Default pursuant to clause
(c) of Section 6.01 if not cured within 30 days after the notice required by
such clause. Failure by the Company to make a Change of Control Offer when
required by this Indenture constitutes a default under this Indenture and, if
not cured within 30 days after notice, constitutes an Event of Default.
(e) If the Company or any Subsidiary thereof has issued any outstanding (i)
Debt that is subordinated in right of payment to the Notes or (ii) Preferred
Stock, and the Company or such Subsidiary is required to make a change of
control offer or to make a distribution with respect to such subordinated Debt
or Preferred Stock in the event of a change of control, the Company will not
consummate any such offer or distribution with respect to such subordinated Debt
or Preferred Stock until such time as the Company will have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Change of Control Offer and shall otherwise have consummated the Change of
Control Offer made to holders of the Notes. The Company shall not issue Debt
that is subordinated in right of payment to the Notes or Preferred Stock with
change of control provisions requiring the payment of such Debt or Preferred
Stock prior to the payment of the Notes in the event of a Change in Control
under this Indenture.
(f) In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to repurchase Notes, if such
repurchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company shall comply with the requirements of
Rule 14e-1 as then in effect with respect to such repurchase.
<PAGE>
-45-
SECTION 4.16. Limitation on Asset Dispositions.
--------------------------------
(a) Except for any Asset Disposition permitted to be made as set forth in
Article Five, if the aggregate fair market value of all Asset Dispositions (as
determined in good faith by the Board of Directors as of the time of each Asset
Disposition) during any consecutive twelve-month period will exceed $5,000,000,
the Company shall not make, and shall not permit any of its Subsidiaries to
make, any Asset Disposition unless (i) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of each such Asset Disposition
at least equal to the fair market value of the shares or assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors if
the Asset Disposition involves shares or assets having a fair market value of
more than $10,000,000); (ii) not less than 80% of the consideration received by
the Company (or such Subsidiary, as the case may be) is in the form of cash
(other than in the case of a full or partial disposition of the Monessen
Facility for the purpose of effecting the sale of all or a portion of the
Monessen Section 29 Tax Credits); provided that any note or other obligation
received by the Company (or such Subsidiary, as the case may be) that is
immediately converted into cash will be deemed to be cash for purposes of clause
(ii); and (iii) the Net Cash Proceeds from such Asset Dispositions are applied,
(A) within twelve months of the date of the receipt of the Net Cash Proceeds,
(1) to the reinvestment in the business or businesses of the Company or any of
its Subsidiaries; provided that this clause (1) shall not be applicable in the
case of Net Cash Proceeds from any Asset Sale in the form of a Receivables
Transaction or (2) to the extent such Net Cash Proceeds are not actually
applied, or cannot be applied, in accordance with clause (1), or, if after being
so applied there remain Net Cash Proceeds, to repay Senior Debt or Guarantor
Senior Debt (other than the Notes and Debt owed by the Company to a Subsidiary
of the Company or by a Subsidiary of the Company to the Company or another
Subsidiary) (including interest thereon and fees, expenses and other obligations
related thereto) and in connection with any such payment, any related loan
commitment, standby facility or the like will be reduced in an amount equal to
the principal amount so repaid, and (B) to the extent that such Net Cash
Proceeds are not actually applied in accordance with clause (A), or, if after
being so applied there remain Net Cash Proceeds, to make an Offer to purchase
the Notes as set forth in the following paragraph (b). Notwithstanding the
foregoing, to the extent that any or all of the Net Cash Proceeds of any Asset
Disposition are prohibited or delayed by applicable non-United States law from
being repatriated to the United States, the portion of such Net Cash Proceeds so
affected will not be required to be applied as set forth in this clause (other
than to repay Debt of the Subsidiary making such Asset Disposition as
contemplated by clause (A)) at the time provided above but may be retained by
the applicable Subsidiary for so long, but only so long as the applicable local
law will not permit repatriation to the United States and once such repatriation
of any of such affected Net Cash Proceeds is permitted under the applicable
local law, such repatriation will be immediately effected and such repatriated
Net Cash Proceeds will be applied in the manner set forth in this section;
provided that to the extent that the Company has determined in good faith that
repatriation of any or all of the Net Cash Proceeds of any such Asset
Disposition would have a material adverse tax cost consequence, the Net Cash
Proceeds
<PAGE>
-46-
so affected may be retained by the applicable Subsidiary for so long as
such material adverse tax cost event would continue.
(b) In the event Net Cash Proceeds are required to be applied to the
purchase of Notes as set forth in clause (iii) of the preceding paragraph (a),
the Company will be required to purchase Notes tendered pursuant to a tender
offer by the Company for the Notes (the "Offer") at a purchase price of 100% of
-----
the principal amount of the Notes plus accrued interest to the purchase date in
accordance with the procedures (including prorating in the event of over
subscription) set forth in this Indenture. If the aggregate purchase price of
Notes tendered pursuant to the Offer is less than the Net Cash Proceeds allotted
to the purchase of the Notes, the Company may utilize such Net Cash Proceeds for
any purpose otherwise permitted under this Indenture. The Company will not be
required to make an Offer for Notes if the Net Cash Proceeds available therefor
are less than $5,000,000 (which lesser amounts not applied to an offer will be
carried forward and cumulated for each 36 consecutive month period for purposes
of determining whether an Offer is required with respect to the Net Cash
Proceeds from any subsequent Asset Disposition).
(c) (i) Within 30 days after the date on which Net Cash Proceeds that are
required to be applied to an Offer exceed $5,000,000, the Company shall deliver
to the Trustee and the Trustee will send by first-class mail to each Holder a
written notice stating that:
(1) such Holder may elect to have his Notes purchased by the Company
either in whole or in part (subject to prorating as hereinafter set forth
in the event the Offer is oversubscribed) in multiples of $1,000 principal
amount, at the applicable purchase price;
(2) any Note not tendered or accepted for payment will continue to
accrue interest;
(3) any Note accepted for payment pursuant to the Offer will cease to
accrue interest after the purchase date; and
(4) Holders will be entitled to withdraw their election in the manner
set forth in clause (iii) below.
The notice shall also specify a purchase date not less than 30 days nor
more than 60 days after the date of such notice (the "Purchase Date") and shall
-------------
include all instructions and materials necessary to enable each Holder to tender
notes pursuant to the Offer and shall contain information concerning the
business of the Company which the Company in good faith believes will enable
such Holders to make an informed decision, which at a minimum will include: (A)
(1) the most recently filed annual report on Form 10-K (including audited
consolidated financial statements) of the Company, the most recent subsequently
filed quarterly report on Form 10-Q
<PAGE>
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and any current report on Form 8-K of the Company filed subsequent to such
quarterly report, other than current reports describing the Asset Dispositions
otherwise described in the offering materials or (2) corresponding successor
reports or reports otherwise required to be delivered to Holders if the Company
is not filing reports pursuant to the Exchange Act, (B) a description of
material developments in the Company's business subsequent to the date of the
latest of such reports, and (C) if material, appropriate pro forma financial
information.
(ii) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (A) the amount of the Offer (the "Offer
-----
Amount"), (B) the allocation of the Net Cash Proceeds pursuant to which such
- ------
Offer is being made and (C) the compliance of such allocation with the
provisions of Section 4.10(a). Not later than one Business Day prior to the
Purchase Date, the Company shall also irrevocably deposit with the Trustee or
with a paying agent (or, if the Company is acting as its own paying agent,
segregate and hold in trust) in immediately available funds an amount equal to
the Offer Amount to be held for payment in accordance with the provisions of
this Section. Upon the expiration of the period for which the Offer remains
open (the "Offer Period"), the Company shall deliver to the Trustee the Notes or
------------
portions thereof which have been properly tendered to and are to be accepted by
the Company. The Trustee or a paying agent (if any) shall, on the Purchase
Date, mail or deliver payment to each tendering Holder in the amount of the
purchase price. In the event that the aggregate purchase price of the Notes
delivered by the Company to the Trustee is Less than the Offer Amount, the
Trustee shall deliver the excess to the Company immediately after the expiration
of the Offer Period.
(iii) Holders electing to have a Note purchased will be required to
surrender the Note, with an appropriate form duly completed, to the Trustee at
the address specified in the notice at least one Business Day prior to the
Purchase Date. Holders will be entitled to withdraw this election if the
Trustee or paying agent (if any) receives not later than the close of business
on the Business Day prior to the Purchase Date a telegram, telex, facsimile
transmission, or letter setting forth the name of the Holder and a statement
that such Holder is withdrawing his election to have all or a portion of his
Notes purchased. If at the expiration of the Offer Period the aggregate
principal amount of Notes surrendered by Holders exceeds the Offer Amount, the
Company will select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or integral multiples thereof, will be purchased).
Holders whose Notes are purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered.
(iv) At the time the Company delivers Notes to the Trustee which are to be
accepted for purchase, the Company will also deliver an Officers' Certificate
stating that such Notes are to be accepted by the Company pursuant to and in
accordance with the terms of this Section. A Note shall be deemed to have been
accepted for purchase at the time the Trustee, directly or through an agent,
mails or delivers payment therefor to the surrendering Holder.
<PAGE>
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(d) In the event the Company is unable to purchase Notes from Holders in an
Offer because such purchase is prohibited by any provision of applicable law,
the Company need not make an Offer. The Company will then be obligated to use
such Net Cash Proceeds as set forth in clause (iii) of paragraph (a) of this
Section 4.16.
(e) Whenever Net Cash Proceeds are received by the Company, and prior to
the allocation of such Net Cash Proceeds as set forth in this Section 4.16, such
Net Cash Proceeds will be set aside by the Company in a separate account pending
allocation.
(f) The Company will comply with all applicable securities laws in
connection with any Offer, including Rule l4e-1 under the Exchange Act.
SECTION 4.17. Limitation on Issuance of
Subsidiary Preferred Stock.
--------------------------
The Company shall not permit any of its Subsidiaries to issue any Preferred
Stock (other than to the Company or a Wholly-Owned Subsidiary) or permit any
Person (other than the Company or a Wholly-Owned Subsidiary) to own or hold any
interest in any Preferred Stock of any such Subsidiary unless the Subsidiary
would be permitted to Incur Debt pursuant to Section 4.12 in an aggregate
principal amount equal to the aggregate liquidation value of such Preferred
Stock.
SECTION 4.18. Limitation on Liens.
-------------------
The Company shall not, and shall not cause or permit any Subsidiary to,
directly or indirectly, Incur or suffer to exist any Liens of any kind against
or upon any of their respective properties or assets now owned or hereafter
acquired, or any proceeds therefrom or any income or profits therefrom, to
secure any Debt unless contemporaneously therewith effective provision is made,
in the case of the Company, to secure the Notes and all other amounts due under
this Indenture, and in the case of a Subsidiary which is a Subsidiary Guarantor,
to secure such Subsidiary Guarantor's Subsidiary Guarantee and all other amounts
due under this Indenture, equally and ratably with such Debt (or, in the event
that such Debt is subordinated in right of payment to the Notes or such
Subsidiary Guarantee, prior to such Debt) with a Lien on the same properties and
assets securing such Debt for so long as such Debt is secured by such Lien,
except for (i) Liens securing any Senior Debt or any Guarantor Senior Debt, (ii)
Liens securing Debt of a Subsidiary which is not required to be a Subsidiary
Guarantor and (iii) Permitted Liens.
SECTION 4.19. Limitation on Sale and Leaseback
Transactions.
--------------------------------------
<PAGE>
-49-
The Company shall not and shall not permit any Subsidiary to enter into any
Sale and Leaseback Transaction with respect to any assets (whether now owned or
hereafter acquired) unless (i) the net proceeds of the sale or transfer of the
property to be leased are at least equal to the fair market value (as determined
by the Board of Directors of the Company) of such assets (other than in the case
of a Sale and Leaseback Transaction entered into in connection with an Approved
Government Financing) and (ii) the Company could incur the Attributable Debt in
respect of such Sale and Leaseback Transaction in compliance with Section 4.12.
SECTION 4.20. Limitation on Guarantees of Debt
by Subsidiaries.
-------------------------------------
In the event that any Subsidiary, directly or indirectly, Guarantees any
Debt of the Company under the New Credit Facilities (the "Other Debt"), the
----------
Company shall cause such Subsidiary to concurrently Guarantee the Company's
Obligations under this Indenture and the Notes to the same extent that such
Subsidiary Guaranteed the Company's Obligations under the Other Debt (including
waiver of subrogation, if any); provided, however, that if such Other Debt is
(i) Senior Debt, such Subsidiary Guarantee will be subordinated in right of
payment to all Guarantor Senior Debt (which will include such Guarantee of such
Other Debt) pursuant to the subordination provisions of this Indenture (which
subordination will be substantially identical to the subordination provisions of
this Indenture applicable to the Notes), (ii) Debt which is not Senior Debt or
Subordinated Debt, such Subsidiary Guarantee will be pari passu in right of
payment with the Guarantee of the Other Debt, or (iii) Subordinated Debt, such
Subsidiary Guarantee will be senior in right of payment to the Guarantee of the
Other Debt (which Guarantee of such Subordinated Debt will provide that such
Guarantee is subordinated to the Subsidiary Guarantee to the same extent and in
the same manner as the Notes are subordinated to Senior Debt); provided,
further, however, that each Subsidiary issuing a Subsidiary Guarantee will be
automatically and unconditionally released and discharged from its obligations
under such Subsidiary Guarantee upon the release or discharge of the Guarantee
of the Other Debt that resulted in the Company's obligations under the Notes and
this Indenture being so Guaranteed.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc.
---------------------------
(a) The Company, in a single transaction or through a series of related
transactions, shall not consolidate with or merge with or into any other person,
or transfer (by lease, assignment, sale or otherwise) all or substantially all
of its properties and assets unless (i) either the Company shall be the
continuing Person, or the Person (if other than the Company) formed
<PAGE>
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by such consolidation or into which the Company is merged or to which all or
substantially all of the properties and assets of the Company are transferred
(the Company or such other person hereinafter referred to as the "Surviving
---------
person") shall be a solvent corporation organized and validly existing under the
- ------
laws of the United States, any state thereof or the District of Columbia,
and if other than the Company shall expressly assume, by a supplemental
indenture, all of the obligations of the Company under the Notes and this
Indenture; (ii) immediately after and giving effect to such transaction on a pro
forma basis and the assumption contemplated by clause (i) above and the
incurrence or anticipated incurrence of any Debt to be incurred in connection
therewith, the Surviving person could incur at least $1.00 of Debt pursuant to
the second paragraph of Section 4.12; (iii) immediately before and immediately
after and giving effect to such transaction and the assumption of the
obligations as set forth in clause (i) above and the incurrence or anticipated
incurrence of any Debt to be incurred in connection therewith, no Default or
Event of Default shall have occurred and be continuing; (iv) the Net Worth of
the Surviving person on a pro forma basis after giving effect to the transaction
is not less than the Net Worth of the Company immediately prior to such
transaction and (v) the Surviving person shall have delivered to the Trustee an
officers' certificate stating that such consolidation, merger, sale, assignment,
transfer, lease, conveyance or other disposition and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with this Article Five and that all conditions precedent herein
provided relating to such transaction have been satisfied.
(b) For purposes of clause (a) above, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Subsidiaries of
the Company the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
Notwithstanding the foregoing clauses (a)(ii) and (a)(iii) of this Section 5.01,
(a) any Subsidiary of the Company may consolidate with, merge into or transfer
all or part of its properties and assets to the Company or a Subsidiary
Guarantor and (b) the Company may merge with an Affiliate incorporated
principally (as determined in good faith by the Board of Directors of the
Company and evidenced by a Board Resolution) for the purpose of reincorporating
the Company in another jurisdiction, and such transaction does not have as one
of its purposes the evasion of the foregoing limitations.
SECTION 5.02. Successor Corporation Substituted.
---------------------------------
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the assets of the Company in accordance with this Article
Five, the surviving entity shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture and the
Notes with the same effect as if such surviving entity had been
<PAGE>
-51-
named as such, and thereafter the predecessor corporation shall be relieved of
all Obligations and covenants under this Indenture and the Notes.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if any one or more of the following (whatever
----------------
the reason for such Event of Default and whether it will be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body) will have occurred and be continuing:
(a) default in the payment of any installment of interest upon any of
the Notes as and when the same will become due and payable, and continuance
of such default for a period of 30 days (whether or not prohibited by the
subordination provisions of this Indenture);
(b) default in the payment of all or any part of the principal on any
of the Notes as and when the same will become due and payable either at
maturity, upon any redemption, upon mandatory repurchase, by declaration or
otherwise (whether or not prohibited by the subordination provisions of
this Indenture);
(c) failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the
Notes or in this Indenture contained for a period of 60 days after the date
on which written notice specifying such failure, stating that such notice
is a "Notice of Default" under this Indenture and demanding that the
Company remedy the same, will have been given by registered or certified
mail, return receipt requested, to the Company by the Trustee, or to the
Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Notes at the time outstanding;
(d) an involuntary case or other proceeding shall be commenced against
the Company or any of its Subsidiaries seeking liquidation, reorganization
or other relief with respect to it or its debts under any Bankruptcy Law
now or hereafter in effect or seeking the appointment of a Custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the
<PAGE>
-52-
Company or any of its Subsidiaries under the federal bankruptcy laws as now
or hereafter in effect;
(e) the Company or any of its Subsidiaries will commence a voluntary
case under any applicable Bankruptcy Law now or hereafter in effect, or
consent to the entry of an order for relief in an involuntary case under
any such law, or consent to the appointment or taking possession by a
Custodian (or similar official) of the Company or any of its Subsidiaries
or for any substantial part of its property, or make any general assignment
for the benefit of creditors;
(f) an event of default, as defined in any indenture or instrument
evidencing or under which the Company or any Subsidiary has at the date of
this Indenture or will hereafter have outstanding at least $10,000,000
aggregate principal amount of Debt, will have occurred and be continuing
and such Debt will have been accelerated so that the same will be or become
due and payable prior to the date on which the same would otherwise have
become due and payable, and such acceleration will not be rescinded or
annulled within 30 days after such acceleration; provided that if such
event of default under such indenture or instrument will be remedied or
cured by the Company or waived by the holders of such indebtedness, then
the Event of Default under this Indenture by reason thereof will be deemed
likewise to have been thereupon remedied, cured or waived without further
action upon the part of either the Trustee or any of the Noteholders;
(g) any final judgment or order (not covered by insurance) for the
payment of money in excess of $10,000,000 in the aggregate for all such
final judgments or orders (treating any deductibles, self-insurance or
retention as not so covered) will be rendered against the Company or any
Subsidiary and will not be discharged, and there will be any period of 30
consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding
against all such Persons to exceed $10,000,000 during which a stay of
enforcement of such final judgment or order, by reason of a pending appeal
or otherwise, will not be in effect;
(h) the Company and/or one or more of its Subsidiaries fails to make
(A) at the final (but not any interim) fixed maturity of any issue of Debt
a principal payment of $10,000,000 or more or (B) at the final (but not any
interim) fixed maturity of more than one issue of such Debt principal
payments aggregating $10,000,000 or more and, in the case of clause (A),
such defaulted payment will not have been made, waived or extended within
30 days of the payment default and, in the case of clause (B), all such
defaulted payments will not have been made, waived or extended within 30
days of the payment default that causes the amount described in clause (B)
to exceed $10,000,000;
<PAGE>
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(i) the nonpayment of any two or more items of Debt that would
constitute at the time of such nonpayments, but for the individual
amounts of such Debt, an Event of Default under clause (f) or clause
(h) above, or both, and which items of Debt aggregate $10,000,000 or
more; or
(j) any Subsidiary Guarantee shall for any reason cease to be
in full force and effect or be declared null and void or any
responsible officer of the Company or any Subsidiary Guarantor denies
that it has any further liability under any Subsidiary Guarantee or
gives notice to such effect (other than by reason of the termination
of this Indenture or the release of any such Subsidiary Guarantee in
accordance with this Indenture).
SECTION 6.02. Acceleration.
------------
In the event of an Event of Default specified in Section 6.01, then, and in
each and every such case, unless the principal of all of the Notes will have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding under this
Indenture, by notice in writing to the Company (and to the Trustee if given by
Noteholders) (an "Acceleration Notice"), may declare the entire principal of all
-------------------
the Notes and the interest accrued thereon, to be due and payable immediately,
and upon any such declaration the same will become immediately due and payable;
provided that, if an Event of Default specified in clause (d) or (e) of Section
6.01 occurs with respect to the Company, all unpaid principal of and accrued
interest on the Notes then outstanding will become and be immediately due and
payable, without any declaration, presentment, demand, protest, notice or other
act on the part of the Trustee or any Holder. Such acceleration may be annulled
and past defaults (other than the non-payment of the principal of the Notes
which will have become due otherwise than by acceleration) may be waived by the
holders of a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company and to the Trustee, upon the
conditions provided in this Indenture.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy
<PAGE>
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is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in
principal amount of the outstanding Notes by notice to the Trustee may waive an
existing Default or Event of Default and its consequences, except a Default in
the payment of principal of or interest on any Note as specified in clauses (a)
and (b) of Section 6.01. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal amount of
the outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it, including, without limitation, any remedies provided for
in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to
follow any direction that the Trustee reasonably believes conflicts with any law
or this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of another Holder, or that may involve the Trustee in personal liability;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 6.06. Limitation on Suits.
-------------------
A Holder may not pursue any remedy with respect to this Indenture or the
Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity reasonably
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of satisfactory indemnity; and
<PAGE>
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(5) during such 60-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which,
in the opinion of the Trustee, is inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted by a Holder
for the enforcement of the payment of principal and premium, if any, or interest
on such Note on or after the respective due dates set forth in such Note
(including upon acceleration thereof); provided that upon institution of any
proceeding or exercise of any remedy, such Holders provide the Trustee with
prompt written notice thereof.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on a Note, on or after
the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest specified in
clause (a) or (b) of Section 6.01 occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company, any Subsidiary Guarantor, if any, or any other obligor on the Notes
for the whole amount of principal and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate per annum borne by the Notes, and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such
<PAGE>
-56-
judicial proceedings is hereby authorized by each Holder to make such payments
to the Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, taxes, disbursements and advances
of the Trustee, its agent and counsel, and any other amounts due the Trustee
under Section 7.07. The Company's payment obligations under this Section 6.09
shall be secured in accordance with the provisions of Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this Article Six,
it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Articles Ten and Eleven, to Holders for amounts
due and unpaid on the Notes for interest and premium, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for interest and premium, respectively;
Third: subject to Articles Ten and Eleven, to Holders for amounts due
and unpaid on the Notes for principal, ratably without preference or
priority of any kind, according to the amounts due and payable on the Notes
for principal; and
Fourth: subject to Articles Ten and Eleven, to the Company, the
Subsidiary Guarantors, if any, or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
<PAGE>
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against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07, or a suit by a Holder or Holders of more than 10% in principal amount of
the outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce any
right or remedy under this Indenture or any Note and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
------------------
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in its exercise thereof as a prudent
person would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and the TIA and no others and no covenants or
obligations shall be implied in this Indenture against the Trustee. To the
extent of any conflict between the duties of the Trustee hereunder and
under the TIA, the TIA shall control.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any such certificate or opinion which by any provision
hereof is specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.
<PAGE>
-58-
(c) Notwithstanding anything to the contrary herein contained, the Trustee
may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph (c) does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or powers
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any document believed by it to be genuine and
to have been signed or presented by the proper Person. The Trustee need
not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of
Counsel, or both, which shall conform to Sections 12.04 and 12.05. The
Trustee shall not be liable for any action it
<PAGE>
-59-
takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any attorney or agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee security
or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred by it in compliance with
such request, order or direction.
(g) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(h) The Trustee shall not be charged with knowledge of any Defaults or
Events of Default unless either (1) a Trust Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of Default shall have been given to the
Trustee by any Holder or by the Company or any other obligor on the Notes
or any holder of Senior Debt or Guarantor Senior Debt or any representative
thereof.
SECTION 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company, any Subsidiary of the
Company, or their respective Affiliates with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
<PAGE>
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SECTION 7.04. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, and it shall not be accountable for the Company's use of
the proceeds from the Notes, and it shall not be responsible for any statement
of the Company in this Indenture or the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default becomes known to the Trustee. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note, the
Trustee may withhold the notice if and so long as its Board of Directors, the
executive committee of its Board of Directors or a committee of its directors
and/or Trust Officers in good faith determines that withholding the notice is in
the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each December 31, the Trustee shall, to the extent
that any of the events described in TIA (S) 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such date that complies with TIA (S) 313(a). The Trustee also shall comply with
TIA (S)(S) 313(b) and (c).
A copy of each report at the time of its mailing to Holders shall be mailed
to the Company and filed with the SEC and each stock exchange, if any, on which
the Notes are listed.
The Company shall promptly notify the Trustee in writing if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA (S)
313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company and the Subsidiary Guarantors shall pay to the Trustee from
time to time reasonable compensation for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company and the Subsidiary Guarantors shall reimburse the
Trustee upon request for all reasonable out-of-pocket expenses incurred or made
by it in connection with the performance of its duties under this Indenture.
Such expenses shall include the reasonable fees and expenses of the Trustee's
agents and counsel.
<PAGE>
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The Company and the Subsidiary Guarantors shall indemnify the Trustee and
its agents, employees, officers, directors and shareholders for, and hold it
harmless against, any loss, liability or expense incurred by it except for such
actions to the extent caused by any negligence, bad faith or willful misconduct
on its part, arising out of or in connection with the administration of this
trust including the reasonable costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company and the Subsidiary Guarantors of their obligations hereunder. At the
Trustee's sole discretion, the Company shall defend the claim and the Trustee
shall provide reasonable cooperation and may participate at the Company's
expense in the defense. Alternatively, the Trustee may at its option have
separate counsel of its own choosing and the Company shall pay the reasonable
fees and expenses of such counsel; provided that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense,
there is no conflict of interest between the Company and the Trustee in
connection with such defense as reasonably determined by the Trustee and no
Default or Event of Default has occurred and is continuing. The Company need not
pay for any settlement made without its written consent, which consent shall not
be unreasonably withheld. The Company need not reimburse any expense or
indemnify against any loss or liability to the extent incurred by the Trustee
through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its capacity as Trustee, except assets or money
held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(d) or (e) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The obligations of the Company under this Section 7.07 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's Obligations pursuant to Article Eight or the termination of
this Indenture.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing, such
resignation to be effective upon the appointment of a successor Trustee. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee in writing and may
appoint a successor Trustee with the Company's consent which consent shall not
be unreasonably withheld. The Company may remove the Trustee if:
<PAGE>
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(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall notify each Holder of such event
and shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation without any further act shall, if such resulting, surviving or
transferee corporation is otherwise eligible hereunder, be the successor
Trustee; provided that such corporation shall be otherwise qualified and
eligible under this Article Seven.
<PAGE>
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SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the requirement of
TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case of a
corporation included in a bank holding company system, the related bank holding
company) shall have a combined capital and surplus of at least $100 million as
set forth in its most recent published annual report of condition. In addition,
if the Trustee is a corporation included in a bank holding company system, the
Trustee, independently of such bank holding company, shall meet the capital
requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S)
310(b); provided, however, that there shall be excluded from the operation of
TIA (S) 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA (S)
310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims
Against Company.
----------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE;
UNCLAIMED MONEYS
SECTION 8.01. Satisfaction and Discharge of Indenture.
---------------------------------------
If at any time (a) the Company shall have paid or caused to be paid the
principal of and interest on all the Notes outstanding hereunder, as and when
the same shall have become due and payable, or (b) the Company shall have
delivered to the Trustee for cancellation all Notes theretofore authenticated
(other than any Notes which shall have been destroyed, lost or stolen and which
shall have been replaced or paid as provided in Section 2.07) or (c) the Company
shall have irrevocably deposited or caused to be deposited with the Trustee as
trust funds the entire amount in cash (other than moneys repaid by the Trustee
or any paying agent to the Company in accordance with Section 8.04) sufficient
to pay at maturity or upon redemption (provided, that in the case of redemption,
if such Notes are to be redeemed prior to the maturity thereof, notice
<PAGE>
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of such redemption shall have been given as herein provided, or provision
satisfactory to the Trustee shall have been made for giving such notice) all
such Notes not theretofore delivered to the Trustee for cancellation, including
principal and interest due or to become due to such date of maturity or
redemption, as the case may be, and if, in any such case, the Company shall also
pay or cause to be paid all other sums payable hereunder by the Company, then
this Indenture shall cease to be of further effect (except as to (i) rights of
registration of transfer and exchange and the Company's right of optional
redemption, (ii) substitution of apparently mutilated, defaced, destroyed, lost
or stolen Notes, (iii) rights of holders to receive payments of principal
thereof and interest thereon, (iv) the rights, obligations and immunities of the
Trustee hereunder and (v) the rights of the Noteholders as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them), and the Trustee, on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company, shall execute proper instruments acknowledging such satisfaction of and
discharging this Indenture. The Company agrees to reimburse the Trustee for any
costs or expenses thereafter reasonably and properly incurred and to compensate
the Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Notes.
SECTION 8.02. Defeasance and Discharge of Indenture.
-------------------------------------
The Company shall be deemed to have paid and discharged the entire
indebtedness on all the outstanding Notes on the 123rd day after the irrevocable
deposit referred to in subparagraph (A) hereof, and the provisions of this
Indenture, as it relates to such outstanding Notes, shall no longer be in effect
(and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging the same), except as to:
(a) rights of registration of transfer and exchange and the Company's
right of optional redemption, (b) substitution of apparently mutilated,
defaced, destroyed, lost or stolen Notes, (c) the rights of Holders to
receive payments of principal thereof and interest thereon, (d) the rights,
obligations and immunities of the Trustee hereunder and (e) the rights of
the Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them;
provided that the following conditions shall have been satisfied (a "Legal
-----
Defeasance"):
- ----------
(A) with reference to this provision the Company has deposited or
caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10) and conveyed all right, title
and interest for the benefit of the Holders, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Noteholders,
(i) cash in an amount, or (ii) U.S. Government Obligations maturing as to
principal and interest at such
<PAGE>
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times and in such amounts as will insure the availability of cash in an
amount, or (iii) a combination thereof, sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of reinvestment of such interest and after
payment of all federal, state and local taxes or other charges payable by
the Trustee with respect to such trust fund, the principal of and each
installment of interest on the outstanding Notes at the maturity date or
redemption date (provided that, in the case of redemption, if such Notes
are to be redeemed prior to the maturity thereof, notice of such redemption
shall have been given as herein provided, or provision satisfactory to the
Trustee shall have been made for giving such notice) of such principal or
installment of interest, on the day on which such payments are due and
payable in accordance with the terms of this Indenture and the Notes;
provided, that the Trustee or paying agent shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of said principal and interest with respect to
the Notes;
(B) such deposit shall not cause the Trustee to have a conflicting
interest for purposes of the Trust Indenture Act of 1939;
(C) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(D) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or
lapse of time or both would become an Event of Default, shall have occurred
and be continuing on the date of such deposit or during the period ending
on the 123rd day after such date;
(E) the Company has delivered to the Trustee (i) either (x) a ruling
directed to the Trustee received from the Internal Revenue Service to the
effect that the Holders of the Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of the Company's exercise
of its option under this Section 8.02 and will be subject to Federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised, or (y) an
Opinion of Counsel to the same effect as the ruling described in clause
(x), and (ii) an Opinion of Counsel to the effect that (x) the trust funds
will not be subject to any rights of holders of Senior Debt, including,
without limitation, those arising under the Indenture and (y) the creation
of the defeasance trust will not violate the Investment Company Act of
1940;
(F) the Company has paid or caused to be paid all sums then payable by
the Company hereunder and under the Notes; and
<PAGE>
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(G) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
provided for relating to the defeasance contemplated by this provision have
been complied with.
SECTION 8.03. Defeasance of Certain Obligations.
----------------------------------
The Company may omit to comply with any term, provision or condition set
forth in Sections 4.10 to 4.20 inclusive and Sections 5.01(a)(ii) and (iv) (a
"Covenant Defeasance") if
- --------------------
(a) with reference to this Section 8.03, the Company has deposited or
caused to be irrevocably deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10) and conveyed all right, title
and interest for the benefit of the Noteholders, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Noteholders,
(i) cash in an amount, or (ii) U.S. Government Obligations maturing as to
principal and interest at such times and in such amounts as will insure the
availability of cash in an amount, or (iii) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, without consideration of reinvestment
of such interest and after payment of all federal, state and local taxes or
other charges payable by the Trustee with respect to such trust fund, the
principal of and each installment of interest on the outstanding Notes on
the maturity date or the redemption date (provided that, in the case of
redemption, if such Notes are to be redeemed prior to the maturity thereof,
notice of such redemption shall have been given as herein provided, or
provision satisfactory to the Trustee shall have been made for giving such
notice) of such principal or installment of interest on the day on which
such payments are due and payable in accordance with the terms of the
Indenture and of such Notes; provided, that the Trustee or paying agent
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to the payment of said principal and
interest with respect to the Notes;
(b) such deposit shall not cause the Trustee to have a conflicting
interest for purposes of the TIA;
(c) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(d) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default or event which with notice or lapse of time or
both would become an Event of Default shall have occurred and be continuing
on the date of such deposit;
<PAGE>
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(e) the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of the Company's
exercise of its option under this Section 8.03 and will be subject to
Federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such option had not been
exercised, (ii) Holders of the Notes will have a valid and perfected first
priority security interest in the trust funds and (iii) the creation of the
defeasance trust will not violate the Investment Company Act of 1940;
(f) the Company has paid or caused to be paid all sums then payable by
the Company hereunder and under the Notes; and
(g) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the defeasance contemplated by this Section
8.03 have been complied with.
SECTION 8.04. Application by Trustee of Funds Deposited
for Payment of Notes.
----------------------------------------------
Subject to Section 8.06, all moneys deposited with the Trustee pursuant to
Section 8.01, 8.02 or 8.03 shall be held in trust and applied by it to the
payment, either directly or through any paying agent (including the Company
acting as its own paying agent), to the holders of the particular Notes for the
payment, repurchase or redemption of which such moneys have been deposited with
the Trustee, of all sums due and to become due thereon for principal and
interest; but such money need not be segregated from other funds except to the
extent required by law.
SECTION 8.05. Repayment of Moneys Held by Paying Agent.
----------------------------------------
In connection with the satisfaction and discharge of this Indenture all
moneys then held by any paying agent under the provisions of this Indenture
shall, upon demand of the Company, be repaid to it or paid to the Trustee and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.
SECTION 8.06. Return of Moneys Held by Trustee and Paying
Agent Unclaimed for Three Years.
-----------------------------------------------
Any moneys deposited with or paid to the Trustee or any paying agent for
the payment of the principal of or interest on any Note and not applied but
remaining unclaimed for three years after the date upon which such principal or
interest shall have become due and payable, shall, upon the written request of
the Company and unless otherwise required by mandatory
<PAGE>
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provisions of applicable escheat or abandoned or unclaimed property law, be
repaid to the Company by the Trustee or such paying agent, and the holder of
such Note shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed property laws, thereafter look only to the
Company for any payment which such holder may be entitled to collect, and all
liability of the Trustee or any paying agent with respect to such moneys shall
thereupon cease.
SECTION 8.07. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or
U.S. Government Obligations in accordance with Article Eight by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's and each Subsidiary Guarantor's obligations under
this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Article Eight until such time as the Trustee or
Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government
Obligations in accordance with Article Eight; provided that if the Company or
any Subsidiary Guarantor, as the case may be, has made any payment of interest
on or principal of any Notes because of the reinstatement of its obligations,
the Company or any Subsidiary Guarantor, as the case may be, shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the U.S.
Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture, the Notes or any Guarantee
without notice to or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that such
amendment or supplement does not adversely affect the rights of any Holder;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
<PAGE>
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(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA; or
(5) to make any change that would provide any additional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
provided that the Company has delivered to the Trustee an Opinion of Counsel and
an Officers' Certificate stating that such amendment or supplement complies with
the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes, may amend or supplement this Indenture, the Notes or any Guarantee
without notice to any other Holders. Subject to Section 6.07, the Holder or
Holders of a majority in aggregate principal amount of the outstanding Notes may
waive compliance by the Company with any provision of this Indenture or the
Notes without notice to any other Holder. No amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, shall, without the consent of each
Holder of each Note affected thereby:
(1) change the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver of any provision of this Indenture, the
Notes or any Guarantee;
(2) reduce the rate of or change or have the effect of extending the
time for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal amount of any Note;
(4) extend the Maturity Date of any Note, or alter the redemption
provisions contained in Article Three or in Paragraph 6 of the Notes or the
repurchase provisions contained in Sections 4.15 and 4.16 in a manner
adverse to any Holder (except that provisions affecting the requirement to
repurchase the Notes following a Change of Control may be amended by the
Company, the Trustee and the Holders of not less than 75% in aggregate
principal amount of Notes then outstanding);
(5) make any changes in provisions concerning waivers of Defaults or
Events of Default by Holders of the Notes or the rights of Holders to
recover the principal of, interest on, premium, if any, or redemption
payment with respect to, any Note;
<PAGE>
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(6) make the principal of, or the interest on, any Note payable with
anything or in any manner other than as provided for in this Indenture and
the Notes as in effect on the date hereof; or
(7) make any change to the subordination provisions of this Indenture
and the Note in a manner adverse to the Holders.
It shall not be necessary for the consent of the Holders under this Section
to approve the particular form of any proposed amendment, supplement or waiver,
but it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Effect on Senior Debt.
---------------------
No amendment, supplement or waiver of this Indenture shall adversely affect
the rights of any holder of Senior Debt or Guarantor Senior Debt, if any
(including their rights under Article Ten or Eleven), without the consent of
such holder.
SECTION 9.04. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
SECTION 9.05. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent to it
by a Holder is a continuing consent by the Holder and every subsequent Holder
of a Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. Subject
to the following paragraph, any such Holder or subsequent Holder may revoke the
consent as to such Holder's Note or portion of such Note by written notice to
the Trustee or the Company received before the date on which the Trustee
receives an Officers' Certificate certifying that the Holders of the requisite
principal amount of Notes have consented (and not theretofore revoked such
consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which
<PAGE>
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record date shall be at least 30 days prior to the first solicitation of such
consent. If a record date is fixed, then notwithstanding the last sentence of
the immediately preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to revoke any consent previously given, whether or not such Persons
continue to be Holders after such record date. No such consent shall be valid
or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it makes a change described in any of clauses (1) through
(7) of Section 9.02, in which case, the amendment, supplement or waiver shall
bind only each Holder of a Note who has consented to it and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note; provided that any such waiver shall not impair or
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may, at the written direction of the Company, require the Holder of the
Note to deliver it to the Trustee. The Trustee at the written direction of the
Company may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note that reflects the changed terms. Any such
notation or exchange shall be made at the sole cost and expense of the Company.
Failure to make the appropriate notation or issue a new Note shall not affect
the validity and effect of such amendment, supplement or waiver.
SECTION 9.07. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Indenture. The Trustee
shall be entitled to receive, if requested, an indemnity reasonably satisfactory
to it and to receive, and shall be fully protected in relying upon, an Opinion
of Counsel and an Officers' Certificate each stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Nine is
authorized or permitted by this Indenture. Such Opinion of Counsel shall not be
an expense of the Trustee.
<PAGE>
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ARTICLE TEN
SUBORDINATION
SECTION 10.01. Notes Subordinated to Senior Debt.
---------------------------------
The Company covenants and agrees and the Trustee and each Holder of the
Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes
shall be issued subject to the provisions of this Article Ten; and the Trustee
and each person holding any Note, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that the payment of all
Obligations on the Notes by the Company shall, to the extent and in the manner
herein set forth, be subordinated and junior in right of payment to the prior
payment in full in cash or Cash Equivalents of all Obligations on the Senior
Debt (including, for all purposes of this Article Ten, the cash
collateralization in full of all outstanding letters of credit constituting
Senior Debt); that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt, and that each holder of
Senior Debt whether now outstanding or hereinafter created, incurred, assumed or
guaranteed shall be deemed to have acquired Senior Debt in reliance upon the
covenants and provisions contained in this Indenture and the Notes.
SECTION 10.02. No Payment on Notes in Certain
Circumstances.
-----------------------------------
(a) No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any payment (a "Defeasance Trust
----------------
Payment") from the trust described under Sections 8.02 or 8.03 (a "Defeasance
- ------- ----------
Trust") but including the establishment of a Defeasance Trust) by or on behalf
- -----
of the Company of principal of or interest or liquidated damages on the Notes,
or for or on account of the purchase, redemption or other acquisition of the
Notes by or on behalf of the Company, whether pursuant to the terms of the
Notes, upon acceleration, pursuant to an Offer, a Change of Control Offer or
otherwise, will be made (including, without limitation, by way of set-off) if,
at the time of such payment, there exists a default in the payment of all or any
portion of the obligations on any Designated Senior Debt, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Designated Senior Debt.
In addition, during the continuance of any non-payment event of default with
respect to any Designated Senior Debt pursuant to which the maturity thereof may
be immediately accelerated, and upon receipt by the Trustee of written notice (a
"Payment Blockage Notice") from the holder or holders of such
-----------------------
<PAGE>
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Designated Senior Debt or the trustee or agent acting on behalf of the holders
of such Designated Senior Debt, then, unless and until such event of default has
been cured or waived or has ceased to exist or such Designated Senior Debt has
been discharged or repaid in full in cash or the benefits of these provisions
have been waived by the holders of such Designated Senior Debt, no direct or
indirect payment (excluding any payment or distribution of Permitted Junior
Securities and excluding any Defeasance Trust Payment but including the
establishment of the Defeasance Trust) will be made (including, without
limitation, by way of set-off) by or on behalf of the Company of principal of or
interest or liquidated damages on the Notes, or for or on account of the
purchase, redemption or other acquisition of the Notes by or on behalf of the
Company, to such Holders, during a period (a "Payment Blockage Period")
-----------------------
commencing on the date of receipt of such notice by the Trustee and ending 179
days thereafter. Notwithstanding anything in the subordination provisions of
this Indenture or the Notes to the contrary, (x) in no event will a Payment
Blockage Period extend beyond 179 days from the date the Payment Blockage Notice
in respect thereof was given, and (y) not more than one Payment Blockage Period
may be commenced with respect to the Notes during any period of 360 consecutive
days. No event of default that existed or was continuing on the date of
commencement of any Payment Blockage Period with respect to the Designated
Senior Debt initiating such Payment Blockage Period (to the extent the holder of
Designated Senior Debt, or trustee or agent, giving notice commencing such
Payment Blockage Period had knowledge of such existing or continuing event of
default) may be, or be made, the basis for the commencement of any other Payment
Blockage Period by the holder or holders of such Designated Senior Debt or the
trustee or agent acting on behalf of such Designated Senior Debt whether or not
within a period of 360 consecutive days, unless such event of default has been
cured or waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by Section
10.02(a), such payment shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Debt (pro rata to such holders
on the basis of the respective amount of Senior Debt held by such holders) or
their respective Representatives, as their respective interests may appear. The
Trustee shall be entitled to rely on information regarding amounts then due and
owing on the Senior Debt, if any, received from the holders of Senior Debt (or
their Representatives) or, if such information is not received from such holders
or their Representatives, from the Company and only amounts included in the
information provided to the Trustee shall be paid to the holders of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the Trustee
or the Holders of Notes to take any action to accelerate the maturity of the
Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder;
provided that all Senior Debt thereafter due or declared to be due shall first
be paid in full in cash or Cash Equivalents before the Holders are entitled to
receive any payment of any kind or character with respect to the Obligations on
the Notes.
<PAGE>
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SECTION 10.03. Payment Over of Proceeds Upon
Dissolution, Etc.
-------------------------------------
(a) Upon any payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any
Defeasance Trust Payment, upon any dissolution or winding-up or total
liquidation or reorganization of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all Senior Debt
shall first be paid in full in cash before the Holders of the Notes or the
Trustee on behalf of such Holders shall be entitled to receive any payment by
the Company of the principal of or interest or liquidated damages on the Notes,
or any payment by the Company to acquire any of the Notes for cash, property or
securities, or any distribution by the Company with respect to the Notes of any
cash, property or securities (excluding any payment or distribution of Permitted
Junior Securities and excluding any Defeasance Trust Payment). Before any
payment may be made by, or on behalf of, the Company of the principal of or
interest or liquidated damages on the Notes upon any such dissolution or
winding-up or total liquidation or reorganization, any payment or distribution
of assets or securities of the Company of any kind or character, whether in
cash, property or securities (excluding any payment or distribution of Permitted
Junior Securities and excluding any Defeasance Trust Payment), to which the
Holders of the Notes or the Trustee on their behalf would be entitled, but for
the subordination provisions of this Indenture, shall be made by the Company or
by any receiver, trustee in bankruptcy, liquidation trustee, agent or other
Person making such payment or distribution, directly to the holders of the
Senior Debt (pro rata to such holders on the basis of the respective amounts of
Senior Debt held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Debt may have been issued, as their respective interests may
appear, to the extent necessary to pay all such Senior Debt in full in cash
after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt. In the event
that, notwithstanding the foregoing, the Trustee or any holder of Notes receives
any payment or distribution of assets of the Company of any kind, whether in
cash, property or securities, including, without limitation, by way of set-off
or otherwise, in respect of the Notes before all Senior Debt of the Company is
paid in full in cash, then such payment or distribution will be held by the
recipient in trust for the benefit of holders of Senior Debt and will be
immediately paid on or delivered to the holders of Senior Debt or their
representative or representatives to the extent necessary to make payment in
full in cash of all Senior Debt remaining unpaid, after giving effect to any
concurrent or distribution, or provision therefor, to or for the holders of
Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in
<PAGE>
-75-
bankruptcy, liquidating trustee, agent or other similar person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar person, the Senior
Debt or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by Section 10.03(a), such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt (pro rata to such holders on the basis of the
respective amount of Senior Debt held by such holders) or their respective
Representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash or Cash
Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
SECTION 10.04. Payments May Be Paid Prior to
Dissolution.
------------------------------------
Nothing contained in this Article Ten or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions set forth in Sections 10.02
and 10.03, from making payments at any time for the purpose of making payments
of principal of and interest on the Notes, or from depositing with the Trustee
any moneys for such payments, or (ii) in the absence of actual knowledge of the
Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Notes to the Holders
entitled thereto unless at least one Business Day prior to the date upon which
such payment would otherwise become due and payable, the Trustee shall have
received the written notice provided for in Section 10.02(a) or in Section 10.07
(provided that, notwithstanding the foregoing, such application shall otherwise
be subject to the provisions of the first sentence of Section 10.02(a) and
Section 10.03). The Company shall give prompt written notice to the Trustee of
any dissolution, winding-up, liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
-----------
Subject to the payment in full in cash or Cash Equivalents of all Senior
Debt, the Holders of the Notes shall be subrogated to the rights of the holders
of Senior Debt to receive payments or distributions of cash, property or
securities of the Company applicable to the Senior Debt until the Notes shall
be paid in full; and, for the purposes of such subrogation, no such payments or
<PAGE>
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distributions to the holders of the Senior Debt by or on behalf of the Company
or by or on behalf of the Holders by virtue of this Article Ten which otherwise
would have been made to the Holders shall, as between the Company and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Senior Debt, it being understood that the provisions of this Article Ten
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Notes, on the one hand, and the holders of the Senior Debt,
on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Ten shall have been
applied, pursuant to the provisions of this Article Ten, to the payment of
amounts payable under the Senior Debt, then the Holders shall be entitled to
receive from the holders of such Senior Debt any payments or distributions
received by such holders of Senior Debt in excess of the amount sufficient to
pay all amounts payable under or in respect of the Senior Debt in full in cash
or Cash Equivalents.
SECTION 10.06. Obligations of the Company
Unconditional.
------------------------------
Nothing any contained in this Article Ten or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among the Company, its creditors
other than the holders of Senior Debt, and the Holders of the Notes, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of and any interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Notes and
creditors of the Company other than the holders of the Senior Debt, nor shall
anything herein or therein prevent the Holder of any Note or the Trustee on its
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
SECTION 10.07. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Notes pursuant to the provisions of this Article Ten.
Regardless of anything to the contrary contained in this Article Ten or
elsewhere in this Indenture, the Trustee shall not be charged with knowledge of
the existence of any default or event of default with respect to any Senior Debt
or of any other facts which would prohibit the making of any payment to or by
the Trustee unless and until the Trustee shall have received notice in writing
from the Company, or from a holder of Senior Debt or a Representative therefor,
and, prior to the receipt of any such written notice, the Trustee shall be
entitled to assume (in the absence of actual knowledge to the contrary) that no
such facts exist.
<PAGE>
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In the event that the Trustee determines in good faith that any evidence is
required with respect to the right of any person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article Ten, the
Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Senior Debt held by such
person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article Ten and, if such evidence is not furnished, the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of the Company referred to in
this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which bankruptcy,
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or upon certificate of the receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, delivered to the
Trustee or the holders of the Notes, for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
---------------------------------
The Trustee and any agent of the Company or the Trustee shall be entitled
to all the rights set forth in this Article Ten with respect to any Senior Debt
which may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of Senior Debt and nothing in this Indenture
shall deprive the Trustee or any such agent of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders
or the Company or any other person money or assets to which any holders of
Senior Debt shall be entitled by virtue of this Article, except if such payment
is made as a result of willful misconduct or gross negligence of the Trustee.
<PAGE>
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Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt, the distribution may be made and the notice given to
their Representatives, if any.
SECTION 10.10. Subordination Rights Not Impaired by
Acts or Omissions of the Company or
Holders of Senior Debt.
----------------------------------------
No right of any present or future holders of any Senior Debt to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Notes and without impairing or releasing the
subordination provided in this Article Ten or the obligations hereunder of the
Holders of the Notes to the holders of the Senior Debt, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Debt, or otherwise amend or
supplement in any manner Senior Debt, or any instrument evidencing the same or
any agreement under which Senior Debt is outstanding; (ii) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (iii) release any Person liable in any manner for the
payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes.
----------------------------------
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Senior Debt and the Holders
of Notes, the subordination provided in this Article Ten, and appoints the
Trustee its attorney-in-fact for such purposes, including, in the event of any
dissolution, winding-up, liquidation or reorganization of the Company (whether
in bankruptcy, insolvency, receivership, reorganization or similar proceedings
or upon an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business as assets of the Company, the filing of a claim for
the unpaid balance of its or his Notes and accrued interest in the form required
in those proceedings.
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If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Senior Debt or their Representative to authorize or
consent to or accept or adopt on behalf of any Holders any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12. This Article Ten Not To Prevent
Events of Default.
------------------------------------
The failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of this Article Ten will not be construed as
preventing the occurrence of an Event of Default.
SECTION 10.13. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article Ten will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE ELEVEN
GUARANTEES
SECTION 11.01. Unconditional Guarantee.
-----------------------
Each Subsidiary Guarantor hereby unconditionally, jointly and severally,
guarantees (such guarantee to be referred to herein as the "Guarantee") to each
---------
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, 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, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise and interest on the overdue
principal, if any, and interest on any interest, to the extent lawful, of the
Notes and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms hereof and thereof; and (ii) in case
of any extension of time of payment or renewal of any Notes or of any such other
obligations, the same will be promptly
<PAGE>
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paid in full when due in accordance with the terms of the extension or renewal,
subject to any applicable grace period, whether at stated maturity, by
acceleration or otherwise, subject, however, in the case of clauses (i) and (ii)
above, to the limitations set forth in Section 11.05. Each Subsidiary Guarantor
hereby agrees that its Obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof or thereof, the
recovery of any judgment against the Company, any action to enforce the same or
any other circumstances which might otherwise constitute a legal or equitable
discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Notes, this Indenture and in
this Guarantee. If any Noteholder or the Trustee is required by any court or
otherwise to return to the Company, any Subsidiary Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Company
or any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary
Guarantor to the Trustee or such Noteholder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect as to such
amount only. Each Subsidiary Guarantor further agrees that, as between each
Subsidiary Guarantor, on the one hand, and the Holders and the Trustee, on the
other hand, (x) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article Six, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by each Subsidiary Guarantor for the purpose of this Guarantee.
SECTION 11.02. Subordination of Guarantee.
--------------------------
Each Subsidiary Guarantor agrees, and each Holder by accepting a Guarantee
agrees, that all Obligations owed under and in respect of such Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
this Article Eleven, to the prior indefeasible payment in full in cash or Cash
Equivalents, of all Guarantor Senior Debt of such Subsidiary Guarantor, and that
the subordination of the Guarantees pursuant to this Article Eleven is for the
benefit of all holders of all Guarantor Senior Debt of such Subsidiary
Guarantor, whether outstanding on the Issue Date or issued thereafter.
SECTION 11.03. Severability.
------------
<PAGE>
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In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.04. Release of a Subsidiary Guarantor.
---------------------------------
Upon (i) a defeasance of the Notes in accordance with the terms of Section
8.02 or 8.03, or (ii) subject to the requirements of Section 5.01, all or
substantially all of the assets of any Subsidiary Guarantor or all of the equity
interests of any Subsidiary Guarantor are sold (including by issuance or
otherwise) by the Company in a transaction constituting an Asset Disposition,
and if (x) the Net Cash Proceeds from such Asset Disposition are used in
accordance with Section 4.16 or (y) the Company delivers to the Trustee an
Officers' Certificate to the effect that the Net Cash Proceeds from such Asset
Disposition shall be used in accordance with Section 4.16 and within the time
limits specified by Section 4.16, then such Subsidiary Guarantor (in the event
of a sale or other disposition of all of the equity interests of such Subsidiary
Guarantor) or the corporation acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Subsidiary
Guarantor) shall be released and discharged of its Subsidiary Guarantee
obligations in respect of this Indenture and the Notes. Any Subsidiary
Guarantor not so released remains liable for the full amount of principal of and
interest on the Notes as provided in this Article Eleven.
SECTION 11.05. Limitation of Subsidiary Guarantor's
Liability.
-------------------------------------------
Each Subsidiary Guarantor and by its acceptance hereof each Holder hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law. To effectuate the foregoing intention, the Holders and
such Subsidiary Guarantor hereby irrevocably agree that the Obligations of such
Subsidiary Guarantor under its Guarantee shall be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Subsidiary Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Guarantee or
pursuant to Section 11.07, result in the Obligations of such Subsidiary
Guarantor under its Guarantee not constituting such fraudulent transfer or
conveyance.
SECTION 11.06. Subsidiary Guarantors May Consolidate,
Etc., on Certain Terms.
-------------------------------------------
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(a) Nothing contained in this Indenture or in any of the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor or shall prevent any sale or conveyance
of the assets of a Subsidiary Guarantor to the Company or another Subsidiary
Guarantor. Upon any such consolidation, merger, sale or conveyance, the
Guarantee given by such Subsidiary Guarantor shall no longer have any force or
effect.
(b) Except as set forth in Article Four, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Subsidiary Guarantor with or into a corporation or corporations other than the
Company or another Subsidiary Guarantor (whether or not affiliated with the
Subsidiary Guarantor), or successive consolidations or mergers in which a
Subsidiary Guarantor or its successor or successors shall be a party or parties,
or shall prevent any sale or conveyance of all or substantially all of the
assets of a Subsidiary Guarantor to a corporation other than the Company or
another Subsidiary Guarantor (whether or not affiliated with the Subsidiary
Guarantor); provided, however, that, subject to Sections 11.04 and 11.06(a),
either (x) the transaction is an Asset Disposition consummated in accordance
with Section 4.16, or (y) (i) immediately after such transaction, and giving
effect thereto, no Default or Event of Default shall have occurred as a result
of such transaction and be continuing, and (ii) each Subsidiary Guarantor hereby
covenants and agrees that, upon any such consolidation, merger, sale or
conveyance, the Guarantee of such Subsidiary Guarantor set forth in this Article
Eleven, and the due and punctual performance and observance of all of the
covenants and conditions of this Indenture to be performed by such Subsidiary
Guarantor, shall be expressly assumed (in the event that the Subsidiary
Guarantor is not the surviving corporation in such transaction), by supplemental
indenture satisfactory in form to the Trustee, executed and delivered to the
Trustee, together with an Officers' Certificate of the Company and an Opinion of
Counsel stating that the transaction and such supplemental indenture comply with
this Indenture, by the corporation formed by such consolidation, or into which
the Subsidiary Guarantor shall have merged, or by the corporation that shall
have acquired such property. In the case of any such consolidation, merger,
sale or conveyance that is not an Asset Disposition consummated in accordance
with Section 4.16, upon the assumption by the successor corporation, by
supplemental indenture executed and delivered to the Trustee and satisfactory in
form to the Trustee of the due and punctual performance of all of the covenants
and conditions of this Indenture to be performed by the Subsidiary Guarantor,
such successor corporation shall succeed to and be substituted for the
Subsidiary Guarantor with the same effect as if it had been named herein as a
Subsidiary Guarantor.
SECTION 11.07. Contribution.
------------
In order to provide for just and equitable contribution among the
Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the
event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under this Guarantee, such Funding
- ------------------
<PAGE>
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Guarantor shall be entitled to a contribution from all other Subsidiary
Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor (including the Funding Guarantor) for all payments, damages
and expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Notes or any other Subsidiary Guarantor's
Obligations with respect to this Guarantee.
SECTION 11.08. Waiver of Subrogation.
---------------------
Each Subsidiary Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Company that arise from
the existence, payment, performance or enforcement of such Subsidiary
Guarantor's Obligations under this Guarantee and this Indenture, including,
without limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against the Company, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any Subsidiary Guarantor in violation of the preceding sentence
and the Notes shall not have been paid in full, such amount shall have been
deemed to have been paid to such Subsidiary Guarantor for the benefit of, and
held in trust for the benefit of, the Holders of the Notes, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Notes, whether matured or unmatured, in accordance with the
terms of this Indenture. Each Subsidiary Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
11.08 is knowingly made in contemplation of such benefits.
SECTION 11.09. Execution of Guarantee; Additional Subsidiary Guarantors.
--------------------------------------------------------
(a) To evidence their guarantee to the Noteholders specified in Section
11.01, the Subsidiary Guarantors hereby agree to execute the Guarantee in
substantially the form of Exhibit A recited to be endorsed on each Note ordered
to be authenticated and delivered by the Trustee. Each Subsidiary Guarantor
hereby agrees that its Guarantee set forth in Section 11.01 shall remain in full
force and effect notwithstanding any failure to endorse on each Note a notation
of such Guarantee. Each such Guarantee shall be signed on behalf of each
Subsidiary Guarantor by one Officer (each of whom shall, in each case, have been
duly authorized by all requisite corporate actions) prior to the authentication
of the Note on which it is endorsed, and the delivery of such Note by the
Trustee, after the authentication thereof hereunder, shall constitute due
delivery of such Guarantee on behalf of such Subsidiary Guarantor. Such
signatures upon the Guarantee may be by manual or facsimile signature of such
officers and may be imprinted or otherwise reproduced on the Guarantee, and in
case any such officer who shall have signed the Guarantee shall cease to be such
officer before the Note on which such Guarantee
<PAGE>
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is endorsed shall have been authenticated and delivered by the Trustee or
disposed of by the Company, such Note nevertheless may be authenticated and
delivered or disposed of as though the person who signed the Guarantee had not
ceased to be such officer of the Subsidiary Guarantor.
(b) The Company shall cause each Subsidiary required to issue a Subsidiary
Guarantee after the Issue Date to (i) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Subsidiary shall become a party to this Indenture and thereby
unconditionally guarantee all of the Company's Obligations under the Notes and
this Indenture on the terms set forth therein and (ii) deliver to the Trustee an
Opinion of Counsel that such supplemental indenture has been duly authorized,
executed and delivered by such Subsidiary and constitutes a legal, valid,
binding and enforceable obligation of such Subsidiary (which opinion may be
subject to customary assumptions and qualifications). Thereafter, such
Subsidiary shall (unless released in accordance with the terms of this
Indenture) be a Subsidiary Guarantor for all purposes of this Indenture.
SECTION 11.10. No Payment on Guarantees in Certain
Circumstances.
------------------------------------------
(a) No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment but
including the establishment of a Defeasance Trust) by or on behalf of any
Subsidiary Guarantor pursuant to its Guarantee of principal of or interest or
liquidated damages on the Notes, or for or on account of the purchase,
redemption or other acquisition of the Notes by or on behalf of the Company,
whether pursuant to the terms of the Notes, upon acceleration, pursuant to an
Offer, a Change of Control Offer or otherwise, will be made (including, without
limitation, by way of set-off) if, at the time of such payment, there exists a
default in the payment of all or any portion of the obligations on any
Designated Senior Debt guaranteed by such Subsidiary Guarantor (which guarantee
constitutes Guarantor Senior Debt of such Subsidiary Guarantor), whether at
maturity, on account of mandatory redemption or prepayment, acceleration or
otherwise, and such default shall not have been cured or waived or the benefits
of this sentence waived by or on behalf of the holders of such Designated Senior
Debt. In addition, during the continuance of any non-payment event of default
with respect to any Designated Senior Debt pursuant to which the maturity
thereof may be immediately accelerated, and upon receipt by the Trustee of
written notice (a "Guarantor Payment Blockage Notice") from the holder or
---------------------------------
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of the holders of such Designated Senior Debt, then, unless and until such event
of default has been cured or waived or has ceased to exist or such Designated
Senior Debt has been discharged or repaid in full in cash or the benefits of
these provisions have been waived by the holders of such Designated Senior Debt,
no direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any
<PAGE>
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Defeasance Trust Payment but including the establishment of the Defeasance
Trust) will be made (including, without limitation, by way of set-off) by or on
behalf of such Subsidiary Guarantor pursuant to its Guarantee of principal of or
interest or liquidated damages on the Notes, or for or on account of the
purchase, redemption or other acquisition of the Notes by or on behalf of the
Company, to such Holders, during a period (a "Guarantor Payment Blockage
--------------------------
Period") commencing on the date of receipt of such notice by
- ------
the Trustee and ending 179 days thereafter. Notwithstanding anything in the
subordination provisions of this Indenture or the Notes to the contrary, (x) in
no event will a Guarantor Payment Blockage Period extend beyond 179 days from
the date the Guarantor Payment Blockage Notice in respect thereof was given, and
(y) not more than one Guarantor Payment Blockage Period may be commenced with
respect to the Notes during any period of 360 consecutive days. No event of
default that existed or was continuing on the date of commencement of any
Guarantor Payment Blockage Period with respect to the Designated Senior Debt
initiating such Guarantor Payment Blockage Period (to the extent the holder of
Designated Senior Debt, or trustee or agent, giving notice commencing such
Guarantor Payment Blockage Period had knowledge of such existing or continuing
event of default) may be, or be made, the basis for the commencement of any
other Guarantor Payment Blockage Period by the holder or holders of such
Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default has been cured or waived for a period of not less
than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Holder when such payment is prohibited by Section
11.10(a), such payment shall be held in trust for the benefit of, shall be paid
over or delivered to, the holders of Guarantor Senior Debt (pro rata to such
holders on the basis of the respective amount of Guarantor Senior Debt held by
such holders) or their respective Representatives, as their respective interests
may appear. The Trustee shall be entitled to rely on information regarding
amounts then due and owing on the Guarantor Senior Debt, if any, received from
the holders of Guarantor Senior Debt (or their Representatives) or, if such
information is not received from such holders or their Representatives, from
such Subsidiary Guarantor and only amounts included in the information provided
to the Trustee shall be paid to the holders of Guarantor Senior Debt.
Nothing contained in this Article Eleven shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Guarantor Senior Debt thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to the Obligations on the Notes or on account of any Subsidiary
Guarantor's Guarantee.
SECTION 11.11. Payment Over of Proceeds Upon
Dissolution, Etc.
------------------------------------
<PAGE>
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(a) Upon any payment or distribution of assets or securities of any
Subsidiary Guarantor of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment, upon any dissolution or winding-up
or total liquidation or reorganization of such Subsidiary Guarantor, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all Guarantor Senior Debt shall first be paid in full in cash
before the Holders of the Notes or the Trustee on behalf of such Holders shall
be entitled to receive any payment by such Subsidiary Guarantor of the principal
of or interest or liquidated damages on the Notes pursuant to its Guarantee, or
any payment by the such Subsidiary Guarantor to acquire any of the Notes for
cash, property or securities, or any distribution by such Subsidiary Guarantor
with respect to its Guarantee of the Notes of any cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment). Before any payment may be made by, or
on behalf of, such Subsidiary Guarantor of the principal of or interest or
liquidated damages on the Notes pursuant to its Guarantee upon any such
dissolution or winding-up or total liquidation or reorganization, any payment or
distribution of assets or securities of such Subsidiary Guarantor of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment), to which the Holders of the Notes or the Trustee on their behalf would
be entitled, but for the subordination provisions of this Indenture, shall be
made by such Subsidiary Guarantor or by any receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or distribution,
directly to the holders of the Guarantor Senior Debt (pro rata to such holders
on the basis of the respective amounts of Guarantor Senior Debt held by such
holders) or their representatives or to the trustee or trustees or agent or
agents under any agreement or indenture pursuant to which any of such Senior
Debt may have been issued, as their respective interests may appear, to the
extent necessary to pay all such Guarantor Senior Debt in full in cash after
giving effect to any prior or concurrent payment, distribution or provision
therefor to or for the holders of such Guarantor Senior Debt. In the event that,
notwithstanding the foregoing, the Trustee or any holder of Notes receives any
payment or distribution of assets of such Subsidiary Guarantor of any kind,
whether in cash, property or securities, including, without limitation, by way
of set-off or otherwise, in respect of such Subsidiary Guarantor's Guarantee of
the Notes before all Guarantor Senior Debt of such Subsidiary Guarantor is paid
in full in cash, then such payment or distribution will be held by the recipient
in trust for the benefit of holders of Guarantor Senior Debt and will be
immediately paid on or delivered to the holders of Guarantor Senior Debt or
their representative or representatives to the extent necessary to make payment
in full in cash of all Guarantor Senior Debt remaining unpaid, after giving
effect to any concurrent or distribution, or provision therefor, to or for the
holders of Guarantor Senior Debt.
(b) To the extent any payment of Guarantor Senior Debt (whether by or on
behalf of such Subsidiary Guarantor, as proceeds of security or enforcement of
any right of setoff or otherwise) is declared to be fraudulent or preferential,
set aside or required to be paid to any
<PAGE>
-87-
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
person under any bankruptcy, insolvency, receivership, fraudulent conveyance or
similar law, then, if such payment is recovered by, or paid over to, such
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
person, the Guarantor Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of a Subsidiary Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 11.11(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders
on the basis of the respective amount of Guarantor Senior Debt held by such
holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Guarantor Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of Guarantor Senior Debt remaining unpaid until all such Guarantor
Senior Debt has been paid in full in cash or Cash Equivalents, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of such Guarantor Senior Debt.
SECTION 11.12. Payments May Be Paid Prior to
Dissolution.
------------------------------------
Nothing contained in this Article Eleven or elsewhere in this Indenture
shall prevent (i) any Subsidiary Guarantor, except under the conditions set
forth in Sections 11.10 and 11.11, from making payments at any time for the
purpose of making payments of principal of and interest on the Notes, or from
depositing with the Trustee any moneys for such payments, or (ii) in the absence
of actual knowledge by the Trustee that a given payment would be prohibited by
Section 11.10 or 11.11, the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of and interest on
the Notes to the Holders entitled thereto unless at least one Business Day prior
to the date upon which such payment would otherwise become due and payable, the
Trustee shall have received the written notice provided for in Section 11.10(a)
or in Section 11.15 (provided that, notwithstanding the foregoing, such
application shall otherwise be subject to the provisions of the first sentence
of Section 11.10(a) and Section 11.11). Each Subsidiary Guarantor shall give
prompt written notice to the Trustee of any dissolution, winding-up, liquidation
or reorganization of any Subsidiary Guarantor.
SECTION 11.13. Subrogation.
-----------
Subject to the payment in full in cash or Cash Equivalents of all Guarantor
Senior Debt, the Holders of the Notes shall be subrogated to the rights of the
holders of Guarantor Senior Debt to receive payments or distributions of cash,
property or securities of such Subsidiary Guarantor
<PAGE>
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applicable to the Guarantor Senior Debt of such Subsidiary Guarantor until the
Notes shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Guarantor Senior Debt by or on
behalf of such Subsidiary Guarantor or by or on behalf of the Holders by virtue
of this Article Eleven which otherwise would have been made to the Holders
shall, as between the Subsidiary Guarantors and the Holders of the Notes, be
deemed to be a payment by such Subsidiary Guarantor to or on account of the
Guarantor Senior Debt, it being understood that the provisions of this Article
Eleven are and are intended solely for the purpose of defining the relative
rights of the Holders of the Notes, on the one hand, and the holders of the
Guarantor Senior Debt, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article Eleven shall have been
applied, pursuant to the provisions of this Article Eleven, to the payment of
amounts payable under the Guarantor Senior Debt, then the Holders shall be
entitled to receive from the holders of such Guarantor Senior Debt any payments
or distributions received by such holders of Guarantor Senior Debt in excess of
the amount sufficient to pay all amounts payable under or in respect of the
Guarantor Senior Debt in full in cash or Cash Equivalents.
SECTION 11.14. Obligations of Each Guarantor
Unconditional.
---------------------------------
Nothing contained in this Article Eleven or elsewhere in this Indenture or
in the Notes or the Guarantees is intended to or shall impair, as among any
Subsidiary Guarantor, its creditors other than the holders of Guarantor Senior
Debt, and the Holders of the Notes, the obligation of such Subsidiary Guarantor,
which is absolute and unconditional, to pay to the Holders of the Notes the
principal of and any interest on the Notes as and when the same shall become due
and payable in accordance with the terms of the Guarantees, or is intended to or
shall affect the relative rights of the Holders of the Notes and creditors of
any Subsidiary Guarantor other than the holders of Guarantor Senior Debt, nor
shall anything herein or therein prevent the Holder of any Note or the Trustee
on its behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, in respect of
cash, property or securities of any Subsidiary Guarantor received upon the
exercise of any such remedy.
SECTION 11.15. Notice to Trustee.
-----------------
The Company or any Subsidiary Guarantor shall give prompt written notice to
the Trustee of any fact known to the Company or any such Subsidiary Guarantor
which would prohibit the making of any payment to or by the Trustee in respect
of the Guarantees pursuant to the provisions of this Article Eleven. Regardless
of anything to the contrary contained in this Article Eleven or elsewhere in
this Indenture, the Trustee shall not be charged with knowledge of the
<PAGE>
-89-
existence of any default or event of default with respect to any Guarantor
Senior Debt or of any other facts which would prohibit the making of any payment
to or by the Trustee unless and until the Trustee shall have received notice in
writing from the Company or a Subsidiary Guarantor, or from a holder of
Guarantor Senior Debt or a Representative therefor, and, prior to the receipt of
any such written notice, the Trustee shall be entitled to assume (in the absence
of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any evidence is
required with respect to the right of any person as a holder of Guarantor Senior
Debt to participate in any payment or distribution pursuant to this Article
Eleven, the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amounts of Guarantor Senior
Debt held by such person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article Eleven, and if such evidence is not
furnished the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
SECTION 11.16. Reliance on Judicial Order or
Certificate of Liquidating Agent.
--------------------------------
Upon any payment or distribution of assets of any Subsidiary Guarantor
referred to in this Article Eleven, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders of the Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
bankruptcy, dissolution, winding-up, liquidation or reorganization proceedings
are pending, or upon certificate of the receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
delivered to the Trustee or the holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such distribution, the
holders of the Guarantor Senior Debt and other Indebtedness of such Subsidiary
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Eleven.
SECTION 11.17. Trustee's Relation to Guarantor Senior Debt.
-------------------------------------------
The Trustee and any agent of any Subsidiary Guarantor or the Trustee shall
be entitled to all the rights set forth in this Article Eleven with respect to
any Guarantor Senior Debt which may at any time be held by it in its individual
or any other capacity to the same extent as any other holder of Guarantor Senior
Debt and nothing in this Indenture shall deprive the Trustee or any such agent
of any of its rights as such holder.
With respect to the holders of Guarantor Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eleven, and no implied covenants
or obligations with respect to the holders of Guarantor Senior
<PAGE>
-90-
Debt shall be read into this Indenture against the Trustee. The Trustee shall
not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Debt
and shall not be liable to any such holders if the Trustee shall pay over or
distribute to or on behalf of Holders or any such Subsidiary Guarantor or any
other person money or assets to which any holders of Guarantor Senior Debt shall
be entitled by virtue of this Article, except if such payment is made as a
result of willful misconduct or gross negligence of the Trustee.
Whenever a distribution is to be made or a notice given to holders or
owners of Guarantor Senior Debt, the distribution may be made and the notice
given to their Representatives, if any.
SECTION 11.18. Subordination Rights Not Impaired by Acts or
Omissions of a Subsidiary Guarantor or Holders
of Guarantor Senior Debt.
---------------------------------------------------
No right of any present or future holders of any Guarantor Senior Debt to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any
Subsidiary Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by such Subsidiary Guarantor with the terms of
this Indenture, regardless of any knowledge thereof which any such holder may
have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Guarantor Senior Debt may, at any time and from time to time, without
the consent of or notice to the Trustee, without incurring responsibility to the
Trustee or the Holders of the Notes and without impairing or releasing the
subordination provided in this Article Eleven or the obligations hereunder of
the Holders of the Notes to the holders of the Guarantor Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment or
extend the time of payment of, or renew or alter, Guarantor Senior Debt, or
otherwise amend or supplement in any manner Guarantor Senior Debt, or any
instrument evidencing the same or any agreement under which Guarantor Senior
Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii)
release any person liable in any manner for the payment or collection of
Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights
against such Subsidiary Guarantor and any other person.
SECTION 11.19. Noteholders Authorize Trustee To Effectuate
Subordination of Guarantees.
----------------------------------------------
Each Holder of Notes by its acceptance of them authorizes and expressly
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate, as between the holders of Guarantor Senior Debt and
the Holders of Notes, the subordination
<PAGE>
-91-
provided in this Article Eleven, and appoints the Trustee its attorney-in-fact
for such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of any Subsidiary Guarantor (whether in
bankruptcy, insolvency, receivership, reorganization or similar proceedings or
upon an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business as assets of such Subsidiary Guarantor, the filing
of a claim for the unpaid balance of its or his Notes and accrued interest in
the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Guarantor Senior Debt or
their Representative are or is hereby authorized to have the right to file and
are or is hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes. Nothing herein contained shall be deemed to
authorize the Trustee or the holders of Guarantor Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holders any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee or the holders of Guarantor Senior Debt or their Representative to vote
in respect of the claim of any Holder in any such proceeding.
SECTION 11.20. This Article Eleven Not To Prevent
Events of Default.
---------------------------------------
The failure to make a payment on account of principal of or interest on the
Notes by reason of any provision of this Article Eleven will not be construed as
preventing the occurrence of an Event of Default.
SECTION 11.21. Trustee's Compensation Not Prejudiced.
-------------------------------------
Nothing in this Article Eleven will apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
ARTICLE TWELVE
MISCELLANEOUS
SECTION 12.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
<PAGE>
-92-
SECTION 12.02. Notices.
-------
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
private courier service guaranteeing next day delivery, by telex, by telecopier
or registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Company or the Subsidiary Guarantors:
Koppers Industries, Inc.
436 Seventh Avenue
Pittsburgh, PA 15219
Attention: Chief Financial Officer
Telecopy: (412) 227-2935
if to the Trustee:
PNC Bank, National Association
One Oliver Plaza, 27th Floor
210 Sixth Avenue
Pittsburgh, PA 15222
Attention: Corporate Trust Group
Telecopy: (412) 762-8226
with a copy to:
General Counsel
c/o The Depository Trust Company
55 Water Street
New York, NY 10041
Telecopy: (212) 853-3274
Each of the Company, the Subsidiary Guarantors and the Trustee by written
notice to each other such Person may designate additional or different addresses
for notices to such Person. Any notice or communication to the Company, the
Guarantors, if any, or the Trustee shall be deemed to have been given or made as
of the date so delivered if personally delivered or delivered by private courier
service guaranteeing next day delivery; when answered back, if telexed; when
receipt is acknowledged, if faxed; and five (5) calendar days after mailing if
sent by registered
<PAGE>
-93-
or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee).
Any notice or communication mailed to a Holder shall be mailed to such
Holder by first class mail or other equivalent means at such Holder's address as
it appears on the registration books of the Registrar and shall be sufficiently
given to such Holder if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 12.03. Communications by Holders with Other
Holders.
----------------------------------------------
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, if any, the Trustee, the Registrar and any other Person shall have
the protection of TIA (S) 312(c).
SECTION 12.04. Certificate and Opinion as to
Conditions Precedent.
------------------------------
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee upon
request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with;
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(3) where applicable, a certificate or opinion by an independent
certified public accountant reasonably satisfactory to the Trustee that
complies with TIA (S) 314(c).
SECTION 12.05. Statements Required in Certificate or
Opinion.
------------------------------------------
<PAGE>
-94-
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee, Paying Agent,
Registrar.
-------------------------------------
The Trustee may make reasonable rules in accordance with the Trustee's
customary practices for action by or at a meeting of Holders. The Paying Agent
or Registrar may make reasonable rules for its functions.
SECTION 12.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment is a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or at such place of payment are not required to be open. If a payment date is a
Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 12.08. Governing Law.
-------------
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
<PAGE>
-95-
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 12.09. No Adverse Interpretation of Other
Agreements.
--------------------------------------
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any of its Subsidiaries. Any such indenture, loan
or debt agreement may not be used to interpret this Indenture.
SECTION 12.10. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as such, of the
Company, the Subsidiary Guarantors, if any, or of the Trustee shall not have any
liability for any obligations of the Company under the Notes or this Indenture.
Each Holder by accepting a Note waives and releases all such liability. Such
waiver and release are part of the consideration for the issuance of the Notes.
This provision does not affect any possible claims under federal securities
laws.
SECTION 12.11. Successors.
----------
All agreements of the Company and the Subsidiary Guarantors, if any, in
this Indenture, the Notes and the Guarantees, if any, shall bind their
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
SECTION 12.12. Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together shall represent the same
agreement.
SECTION 12.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the Notes
or in the Guarantees, if any, shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
<PAGE>
-96-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
KOPPERS INDUSTRIES, INC.
By: /s/ Clayton A. Sweeney
------------------------------------
Name: Clayton A. Sweeney
Title: Director
GUARANTORS:
KOPPERS INDUSTRIES INTERNATIONAL
TRADE CORP.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Secretary
WORLD WIDE VENTURES CORPORATION
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Secretary
KOPPERS INDUSTRIES OF DELAWARE, INC.
By: /s/ M. Claire Schaming
------------------------------------
Name: M. Claire Schaming
Title: Secretary
KOPPERS CONCRETE PRODUCTS, INC.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Secretary
<PAGE>
-97-
CONCRETE PARTNERS INC.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Secretary
KOPPERS INDUSTRIES B.W., INC.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Secretary
CONTINENTAL CARBON AUSTRALIA PTY
LTD.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
KOPPERS TIMBER PRESERVATION PTY LTD.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
KOPPERS COAL TAR PRODUCTS PTY LTD.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
<PAGE>
-98-
KOPPERS SHIPPING PTY LTD.
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
KOPPERS FOREIGN INVESTMENT
CORPORATION
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Authorized Signatory
KOPPERS AUSTRALIA PTY LIMITED
By: /s/ Randall D. Collins
------------------------------------
Name: Randall D. Collins
Title: Under Power of Attorney
PNC BANK, NATIONAL ASSOCIATION,
as Trustee
By: /s/ F. J. Deramo
------------------------------------
Name: F. J. Deramo
Title: Vice President
<PAGE>
EXHIBIT A(1)
------------
[FORM OF INITIAL NOTE]
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY (1) BY ITS ACQUISITION HEREOF REPRESENTS THAT (A) IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT AND (2) IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE ISSUER THAT PRIOR TO THE DATE WHICH IS TWO YEARS
AFTER THE LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE
(THE "RESALE RESTRICTION TERMINATION DATE") (X) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S.
PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS),
(ii) TO THE ISSUER OR (iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (Y) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (X) ABOVE THE
FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.
<PAGE>
CUSIP No.: [ ]
KOPPERS INDUSTRIES, INC.
9 7/8% SENIOR SUBORDINATED NOTE DUE 2007
No. [ ] $[ ]
KOPPERS INDUSTRIES, INC., a Pennsylvania corporation (the "Company,"
which term includes any successor entity), for value received promises to pay to
[ ] or registered assigns, the principal sum of [ ] Dollars, on
December 1, 2007.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
KOPPERS INDUSTRIES, INC.
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Dated: [ ] Title:
Certificate of Authentication
This is one of the 9 7/8% Senior Subordinated Notes due 2007 referred to in
the within-mentioned Indenture.
PNC Bank, National Association, as Trustee
By:
--------------------------------------
Authorized Signatory
A.1-2
<PAGE>
(REVERSE OF SECURITY)
9 7/8% Senior Subordinated Note due 2007
----------------------------------------
1. Interest. KOPPERS INDUSTRIES, INC., a Pennsylvania corporation (the
--------
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from December 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing June 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes (except
-----------------
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, PNC Bank, National Association
--------------------------
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of December 1, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Initial Notes of
the Company designated as its 9 7/8% Senior Subordinated Notes due 2007 (the
"Initial Notes"). The Notes include the Initial Notes and the Exchange Notes
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and said Act for a statement of them. The Notes
are general unsecured obligations of the Company limited in aggregate principal
amount to $175,000,000. Under certain circumstances as provided for in Article
Eleven of the Indenture, the payment on each Note may be guaranteed on a senior
subordinated basis by the Subsidiary Guarantors. Each Holder, by
A.1-3
<PAGE>
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
5. Subordination. The Notes are subordinated in right of payment, in the
-------------
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Subsidiary Guarantor, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Each Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee its attorney-in-fact for such
purposes.
6. Redemption Provisions. Except as provided below, the Notes may not be
---------------------
redeemed prior to December 1, 2002.
(a) Optional Redemption. The Notes are redeemable, at the Company's
-------------------
option, in whole or in part, at any time on or after December 1, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the registry
books, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period beginning December 1,
of the years indicated:
Year Redemption Price
---- ----------------
2002 104.938%
2003 103.292%
2004 101.646%
2005 and thereafter 100.000%
plus accrued and unpaid interest, if any, to the date of such redemption.
(b) Notwithstanding the foregoing, at any time prior to December 1,
2000, the Company may, at its option, redeem up to 35% of the aggregate
principal amount of Notes with the net proceeds of one or more issuances of
Common Stock (other than Redeemable Stock) at a redemption price (expressed as a
percentage of principal amount) of 109.875% plus accrued interest, if any, to
the date of such redemption; provided that at least $100,000,000 aggregate
principal amount of Notes would remain outstanding after giving effect to any
such redemption and that any such redemption occurs within 90 days following the
closing of any such offering.
A.1-4
<PAGE>
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of
the Notes called for redemption shall have been deposited with the Paying Agent
for redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that,
------------------
upon a Change of Control, each holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Dispositions, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered
---------------------------------
form, without coupons, in denominations of $1,000 and integral multiples of
$1,000. A Holder shall register the transfer of or exchange Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay certain
transfer taxes or similar governmental charges payable in connection therewith
as permitted by the Indenture. The Registrar need not register the transfer of
or exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for three years, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any
-----------------------------------------
time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions,
-----------------------------
the Indenture, the Notes or the Guarantee, if any, may be amended or
supplemented with the written consent of the
A.1-5
<PAGE>
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or noncompliance with
any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations
---------------------
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Debt or Liens, make payments in respect of its Capital Stock or
subordinated obligations, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, incur Debt that
is, by its terms, subordinated or junior to any other Debt and senior to the
Notes, merge or consolidate with any other Person, sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets or
adopt a plan of liquidation and sell Capital Stock of a Subsidiary. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually and quarterly report to the Trustee on compliance with
such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture,
-----------------------------
in its individual or any other capacity, may become the owner or pledgee of
Notes and may otherwise deal with the Company, its Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture. Each Holder of
a Note by accepting a Note waives and
A.1-6
<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee
--------------
or Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern
-------------
this Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be
-------------------------------
used in the name of a Holder of a Note 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/T/M/A (= Uniform Transfers to Minors Act).
22. 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 as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound
---------
by all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request
and without charge a copy of the Indenture. Requests may be made to: Koppers
Industries, Inc., 436 Seventh Avenue, Pittsburgh, PA 15219, Attn: Chief
Financial Officer.
A.1-7
<PAGE>
SENIOR SUBORDINATED GUARANTEE
KOPPERS INDUSTRIES INTERNATIONAL TRADE CORP., WORLD WIDE VENTURES
CORPORATION, KOPPERS INDUSTRIES OF DELAWARE, INC., KOPPERS CONCRETE PRODUCTS,
INC., CONCRETE PARTNERS INC., KOPPERS INDUSTRIES B.W., INC., CONTINENTAL CARBON
AUSTRALIA PTY LTD., KOPPERS TIMBER PRESERVATION PTY LTD., KOPPERS COAL TAR
PRODUCTS PTY LTD., KOPPERS SHIPPING PTY LTD., KOPPERS FOREIGN INVESTMENT
CORPORATION and KOPPERS AUSTRALIA PTY LIMITED (the "Subsidiary Guarantors") have
unconditionally guaranteed on a senior subordinated basis (such guarantee by
each Guarantor being referred to herein as the "Guarantee") (i) the due and
punctual payment of the principal of and interest on the Notes, whether at
maturity, by acceleration or otherwise and the due and punctual payment of
interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven of the Indenture, and reference is hereby made to such Indenture for the
precise terms of the Guarantee therein made. This Guarantee is limited under
the Indenture to the extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Subsidiary Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. Each holder of a Note by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Guarantees.
A.1-8
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
KOPPERS INDUSTRIES INTERNATIONAL TRADE
CORP.
By:
--------------------------------------
Name:
Title:
WORLD WIDE VENTURES CORPORATION
By:
--------------------------------------
Name:
Title:
KOPPERS INDUSTRIES OF DELAWARE, INC.
By:
--------------------------------------
Name:
Title:
KOPPERS CONCRETE PRODUCTS, INC.
By:
--------------------------------------
Name:
Title:
A.1-9
<PAGE>
CONCRETE PARTNERS INC.
By:
--------------------------------------
Name:
Title:
KOPPERS INDUSTRIES B.W., INC.
By:
--------------------------------------
Name:
Title:
CONTINENTAL CARBON AUSTRALIA PTY LTD.
By:
--------------------------------------
Name:
Title:
KOPPERS TIMBER PRESERVATION PTY LTD.
By:
--------------------------------------
Name:
Title:
KOPPERS COAL TAR PRODUCTS PTY LTD.
By:
--------------------------------------
Name:
Title:
A.1-10
<PAGE>
KOPPERS SHIPPING PTY LTD.
By:
--------------------------------------
Name:
Title:
KOPPERS FOREIGN INVESTMENT
CORPORATION
By:
--------------------------------------
Name:
Title:
KOPPERS AUSTRALIA PTY LIMITED
By:
--------------------------------------
Name:
Title:
A.1-11
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint agent to transfer
------------------------------------
this Note on the books of the Company. The agent may substitute another to
act for him.
Date: Signed:
--------------------------------- ----------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
------------------------------------------------------
NOTICE: Signature(s) must be guaranteed by an approved
eligible guarantor institution, an institution which
is a participant in a Securities Transfer Association
recognized signature guarantee program.
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date of the declaration by the SEC of the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) December 1, 1999, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Note is being transferred:
[Check One]
(1) to the Company or a subsidiary thereof; or
-----
(2) pursuant to and in compliance with Rule 144A under the Securities
----- Act; or
(3) ----- to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has
furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be
obtained from the Trustee); or
A.1-12
<PAGE>
(4) outside the United states to a "foreign person" in compliance with
----- Rule 904 of Regulation S under the Securities Act; or
(5) pursuant to the exemption from registration provided by Rule 144
----- under the Securities Act; or
(6) pursuant to an effective registration statement under the Securities
----- Act; or
(7) pursuant to another available exemption from the registration
----- requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Registrar shall
not be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.16 of the Indenture shall have
been satisfied.
Date: Signed:
--------------------------- ------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
--------------------------------------------------------
NOTICE: Signature(s) must be guaranteed by an approved
eligible guarantor institution, an institution
which is a participant in a Securities Transfer
Association recognized signature guarantee program.
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned
A.1-13
<PAGE>
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Date: Signed:
--------------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
A.1-14
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
---------------------------
Dated:
--------------------- --------------------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:
----------------------------------------------------------
NOTICE: Signature(s) must be guaranteed by an approved
eligible guarantor institution, an institution which is a
participant in a Securities Transfer Association recognized
signature guarantee program.
A.1-15
<PAGE>
EXHIBIT A(2)
------------
[FORM OF EXCHANGE NOTE]
CUSIP No.:[ ]
KOPPERS INDUSTRIES, INC.
9 7/8% SENIOR SUBORDINATED NOTE DUE 2007
No.[ ] $[ ]
KOPPERS INDUSTRIES, INC., a Pennsylvania corporation (the "Company,"
which term includes any successor entity), for value received promises to pay to
[ ] or registered assigns, the principal sum of [ ] Dollars, on
December 1, 2007.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and December 15
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
KOPPERS INDUSTRIES, INC.
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Dated: [ ] Title:
Certificate of Authentication
This is one of the 9 7/8% Senior Subordinated Notes due 2007 referred
to in the within-mentioned Indenture.
PNC Bank, National Association, as Trustee
By:
---------------------------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
9 7/8% Senior Subordinated Note due 2007
1. Interest. KOPPERS INDUSTRIES, INC., a Pennsylvania corporation (the
--------
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from December 1, 1997. The Company will pay interest semi-annually in arrears
on each Interest Payment Date, commencing June 1, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on overdue
installments of interest from time to time on demand at the rate borne by the
Notes and on overdue installments of interest (without regard to any applicable
grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes (except
-----------------
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are canceled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, PNC Bank, National Association
--------------------------
(the "Trustee") will act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as
---------
of December 1, 1997 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. This Note is one of a duly authorized issue of Exchange Notes
of the Company designated as its 9 7/8% Senior Subordinated Notes due 2007 (the
"Exchange Notes"). The Notes include the Initial Notes and the Exchange Notes
issued in exchange for the Initial Notes pursuant to the Registration Rights
Agreement. The Initial Notes and the Exchange Notes are treated as a single
class of securities under the Indenture. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and said Act for a statement of them. The Notes
are general unsecured obligations of the Company limited in aggregate principal
amount to $175,000,000. Under certain circumstances as provided for in Article
Eleven of the Indenture, the payment on each Note may be guaranteed on a senior
subordinated basis by the Subsidiary Guarantors. Each Holder, by
A.2-2
<PAGE>
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
5. Subordination. The Notes are subordinated in right of payment, in the
-------------
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. The Guarantees in respect of the Notes will be
subordinated in right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash Equivalents of all
Guarantor Senior Debt of each Subsidiary Guarantor, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Each Holder by its acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on its behalf, to take such action
as may be necessary or appropriate to effectuate the subordination provided for
in the Indenture and appoints the Trustee its attorney-in-fact for such
purposes.
6. Redemption Provisions. Except as provided below, the Notes may not be
---------------------
redeemed prior to December 1, 2002.
(a) Optional Redemption. The Notes are redeemable, at the Company's
-------------------
option, in whole or in part, at any time on or after December 1, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the registry
books, at the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period beginning December 1,
of the years indicated:
Year Redemption Price
---- ----------------
2002..................... 104.938%
2003..................... 103.292%
2004..................... 101.646%
2005 and thereafter...... 100.000%
plus accrued and unpaid interest, if any, to the date of such redemption.
(b) Notwithstanding the foregoing, at any time prior to December 1, 2000,
the Company may, at its option, redeem up to 35% of the aggregate principal
amount of Notes with the net proceeds of one or more issuances of Common Stock
(other than Redeemable Stock) at a redemption price (expressed as a percentage
of principal amount) of 109.875% plus accrued interest, if any, to the date of
such redemption; provided that at least $100,000,000 aggregate principal amount
of Notes would remain outstanding after giving effect to any such redemption and
that any such redemption occurs within 90 days following the closing of any such
offering.
A.2-3
<PAGE>
7. Notice of Redemption. Notice of redemption will be mailed at least 30
--------------------
days but not more than 60 days before the Redemption Date. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the redemption of the
Notes called for redemption shall have been deposited with the Paying Agent for
redemption on such Redemption Date, then, unless the Company defaults in the
payment of such Redemption Price plus accrued interest, if any, the Notes called
for redemption will cease to bear interest from and after such Redemption Date
and the only right of the Holders of such Notes will be to receive payment of
the Redemption Price plus accrued interest, if any.
8. Offers to Purchase. Section 4.15 of the Indenture provides that, upon
------------------
a Change of Control, each holder will have the right, subject to certain
conditions set forth in the Indenture, to require the Company to repurchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued interest to the date of repurchase. Section 4.16 of the Indenture
provides that, after certain Asset Dispositions, and subject to further
limitations contained therein, the Company will make an offer to purchase
certain amounts of the Notes in accordance with the procedures set forth in the
Indenture.
9. Denominations; Transfer; Exchange. The Notes are in registered form,
---------------------------------
without coupons, in denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption.
10. Persons Deemed Owners. The registered Holder of a Note shall be
---------------------
treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or interest
---------------
remains unclaimed for three years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company at any time
-----------------------------------------
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain exceptions, the
-----------------------------
Indenture, the Notes or the Guarantee, if any, may be amended or supplemented
with the written consent of the
A.2-4
<PAGE>
Holders of at least a majority in aggregate principal amount of the Notes then
outstanding, and any existing Default or Event of Default or noncompliance with
any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain limitations on
---------------------
the ability of the Company and its Subsidiaries to, among other things, incur
additional Debt or Liens, make payments in respect of its Capital Stock or
subordinated obligations, enter into transactions with Affiliates, create
dividend or other payment restrictions affecting Subsidiaries, incur additional
Debt that is by its terms subordinated or junior to any other Debt and senior to
the Notes, merge or consolidate with any other Person, sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets or
adopt a plan of liquidation and sell Capital Stock of a Subsidiary. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually and quarterly report to the Trustee on compliance with
such limitations.
15. Successors. When a successor assumes, in accordance with the
----------
Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from Holders of Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the Indenture, in
-----------------------------
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director, officer,
--------------------------
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Notes or the Indenture. Each Holder of
a Note by accepting a Note waives and
A.2-5
<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid until the Trustee or
--------------
Authenticating Agent manually signs the certificate of authentication on this
Note.
20. Governing Law. The laws of the State of New York shall govern this
-------------
Note and the Indenture, without regard to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary abbreviations may be used
-------------------------------
in the name of a Holder of a Note 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/T/M/A (= Uniform Transfers to Minors Act).
22. 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 as a convenience to the Holders of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification numbers
printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be bound by
---------
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Company will furnish to any Holder of a Note upon written request and
without charge a copy of the Indenture. Requests may be made to: Koppers
Industries, Inc., 436 Seventh Avenue, Pittsburgh, PA 15219, Attn: Chief
Financial Officer.
A.2-6
<PAGE>
SENIOR SUBORDINATED GUARANTEE
KOPPERS INDUSTRIES INTERNATIONAL TRADE CORP., WORLD WIDE VENTURES
CORPORATION, KOPPERS INDUSTRIES OF DELAWARE, INC., KOPPERS CONCRETE PRODUCTS,
INC., CONCRETE PARTNERS INC., KOPPERS INDUSTRIES B.W., INC., CONTINENTAL CARBON
AUSTRALIA PTY LTD., KOPPERS TIMBER PRESERVATION PTY LTD., KOPPERS COAL TAR
PRODUCTS PTY LTD., KOPPERS SHIPPING PTY LTD., KOPPERS FOREIGN INVESTMENT
CORPORATION and KOPPERS AUSTRALIA PTY LIMITED (the "Subsidiary Guarantors") have
unconditionally guaranteed on a senior subordinated basis (such guarantee by
each Guarantor being referred to herein as the "Guarantee") (i) the due and
punctual payment of the principal of and interest on the Notes, whether at
maturity, by acceleration or otherwise and the due and punctual payment of
interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in Article Eleven of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of each Subsidiary Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full in cash or Cash Equivalents of all Guarantor Senior Debt of such
Subsidiary Guarantor, to the extent and in the manner provided, in Article
Eleven of the Indenture, and reference is hereby made to such Indenture for the
precise terms of the Guarantee therein made. This Guarantee is limited under
the Indenture to the extent necessary not to constitute a fraudulent conveyance.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Subsidiary Guarantors shall have any
liability under the Guarantee by reason of such person's status as stockholder,
officer, director, employee or incorporator. Each holder of a Note by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Guarantees.
A.2-7
<PAGE>
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
KOPPERS INDUSTRIES INTERNATIONAL TRADE
CORP.
By:
---------------------------------------
Name:
Title:
WORLD WIDE VENTURES CORPORATION
By:
---------------------------------------
Name:
Title:
KOPPERS INDUSTRIES OF DELAWARE, INC.
By:
---------------------------------------
Name:
Title:
KOPPERS CONCRETE PRODUCTS, INC.
By:
---------------------------------------
Name:
Title:
A.2-8
<PAGE>
CONCRETE PARTNERS INC.
By:
---------------------------------------
Name:
Title:
KOPPERS INDUSTRIES B.W., INC.
By:
---------------------------------------
Name:
Title:
CONTINENTAL CARBON AUSTRALIA PTY LTD.
By:
---------------------------------------
Name:
Title:
KOPPERS TIMBER PRESERVATION PTY LTD.
By:
---------------------------------------
Name:
Title:
KOPPERS COAL TAR PRODUCTS PTY LTD.
By:
---------------------------------------
Name:
Title:
A.2-9
<PAGE>
KOPPERS SHIPPING PTY LTD.
By:
---------------------------------------
Name:
Title:
KOPPERS FOREIGN INVESTMENT
CORPORATION
By:
---------------------------------------
Name:
Title:
KOPPERS AUSTRALIA PTY LIMITED
By:
---------------------------------------
Name:
Title:
A.2-10
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint agent to transfer
-------------------------------------
this Note on the books of the Company. The agent may substitute another to act
for him.
Date: Signed:
--------------------------- --------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
---------------------------------------------------------
NOTICE: Signature(s) must be guaranteed by an approved
eligible guarantor institution, an institution which is a
participant in a Securities Transfer Association recognized
signature guarantee program.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$
------------------------------
Dated:
-------------------------- -----------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon
A.2-11
<PAGE>
the face of the within Note in every particular
without alteration or enlargement or any change
whatsoever and be guaranteed by the endorser's
bank or broker.
Signature Guarantee:
----------------------------------------------------------
NOTICE: Signature(s) must be guaranteed by an approved
eligible guarantor institution, an institution which is a
participant in a Securities Transfer Association recognized
signature guarantee program.
A.2-12
<PAGE>
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall bear a legend
(which would be in addition to any other legends required in the case of a
Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT
EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS
NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
PNC Bank, National Association
One Oliver Plaza, 27th Floor
210 Sixth Avenue
Pittsburgh, PA 15222
Attention: Corporate Trust
Re: KOPPERS INDUSTRIES, INC.
9 7/8% Senior Subordinated
Notes due 2007
----------------------------
Ladies and Gentlemen:
We are delivering this letter in connection with a proposed purchase of 9
7/8% Senior Subordinated Notes due 2007 (the "Notes") of Koppers Industries,
Inc. (the "Company").
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act (an "Institutional Accredited Investor");
(ii) any purchase of Notes by us will be for our own account or for
the account of one or more other Institutional Accredited Investors;
(iii) in the event that we purchase any Notes, we will acquire Notes
having a minimum purchase price of at least $100,000 for our own account
and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Notes;
(v) we are not acquiring Notes with a view to any distribution thereof
in a transaction that would violate the Securities Act or the securities
laws of any State of the United States or any other applicable
jurisdiction; provided that the disposition of our
C-1
<PAGE>
property and the property of any accounts for which we are acting as
fiduciary shall remain at all times within our control; and
(vi) we acknowledge that we have had access to such financial and
other information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto, as
we deem necessary in connection with our decision to purchase Notes.
We understand that the Notes are being offered in a transaction not
involving any public offering within the meaning of the Securities Act and that
the Notes have not been registered under the Securities Act, and we agree, on
our own behalf and on behalf of each account for which we acquire any Notes,
that such Notes may be offered, resold, pledged or otherwise transferred only
(i) to a person whom we reasonably believe to be a qualified institutional buyer
(as defined in Rule 144A under the Securities Act), in a transaction meeting the
requirements of Rule 144A, in a transaction meeting the requirements of Rule
144, outside the United states in a transaction meeting the requirements of Rule
904 under the Securities Act, or in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion of
counsel if the Company so requests), (ii) to the Company or (iii) pursuant to an
effective registration statement, and, in each case, in accordance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction. We understand that the registrar will not be required
to accept for registration of transfer any Notes, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. We further understand that the Notes purchased by us
will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph.
We acknowledge that you and others will rely upon our confirmation,
acknowledgments and agreements set forth herein, and we agree to notify you
promptly in writing if any of our representations or warranties herein ceases to
be accurate and complete.
C-2
<PAGE>
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
------------------------------------------
(Name of Purchaser)
By:
--------------------------------------
Name:
Title:
Address:
---------------------------------
---------------------------------
---------------------------------
C-3
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------------------
______________, ____
PNC Bank, National Association
One Oliver Plaza, 27th Floor
210 Sixth Avenue
Pittsburg, PA 15222
Attention: Corporate Trust
Re: KOPPERS INDUSTRIES, INC.
(the "Company") 9 7/8% Senior
Subordinated Notes due 2007 (the "Notes")
-----------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
D-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
----------------------------------
Authorized Signature
D-2
<PAGE>
Schedule I
----------
Allison, Byron L.
Allison, Ruby A.
Ambrose, Gary F.
Ambrose, Barbara E.
Bachman, Drew H.
Bachman, Donna R.
Baron, John T.
Baron, Mary Ellen
Beswick, Paul C.
Beswick, Elizabeth McKee
Boan, Joseph E.
Boan, Karen L.
Brown, Frederick, L.
Brown, Delores A
Brucker, Keith, J.
Buxton, III, James H.
Buxton, Sydney C.
Calfe, Joseph
Calfe, Janeice M.
Caric, George W.
Collins, Randall D.
Collins, Ann S.
Davidson, Edward E.
Davis, Donald E.
Juzwick-Davis, Claire M.
Dennis, William R.
Dennis, Sherran B.
Donley, William R.
Dugan, Conrad C.
Dugan, Carol J.
Duke, Rebecca, R.
Duke, Richard H.
Evans, Donald E.
Evans, Elizabeth B.
Fay, Dan R.
Fay, Nancy G.
Fitch, Norma J.
Fitzgerald, Kevin J.
Fitzgerald, Sharon M.
Franck, Mark A.
Franck, Melodee Ann
Freeman, Lawrence M.
Freeman, Carolyn F.
Geels, Walter M.
Golubic, Thomas A.
Grec, Cheryl M.
Grec, Michael, J.
Hall, Phillip C.
Hall, Mary W.
Harrill, Lloyd
Harrill, Mary Kathryn
Harris, Richard A.
Hasley, William L.
Heal, Phillip W.
<PAGE>
Heller, John R.
Heller, Julie A.
Henry, Clyde, E.
Henry, Mary E.
Hoffman, Dennis W.
Hoffman, Arlene M.
Hordyk, Dwight G.
Hordyk, Rebecca A.
Izaj, Thomas, N.
Izaj, Deborah L.
Javorski, Stephanie
Javorski, Timothy J.
Jensen, Krogh
Juba, Michael H.
Juba, Carol J.
Kamerer, Amos
Kamerer, Lana
Klink, Merle W.
Klink, Audrey
Kraynik, Charles E.
Kress, John L.
Kress, Maryann
Kunkle, John W.
La Duke, Andrew J.
La Duke, Margaret
Ladd, Paul D.
Ladd, Vianna J.
Lantz, Robert L.
Lantz, Virginia R.
Ledoux, Norman W.
Loadman, Thomas D.
Loadman, Patricia
Macel, Dennis A.
Macel, Kathleen
Marcinowski, John E.
Mason, Robert T.
Mason, Nancy E.
McGough, Jr., Homer E.
McGough, Sue K.
McHenry, Edgar R.
McHenry, Bernice R.
Meadows, Douglas E.
Meadows, Carolyn
Melsinger, William A.
Melsinger, Carolyn R.
Mitchell, Clark J.
Mitchell, Judith A.
Morris, Sr., Robert J.
Morse, John L.
Murray, Marion H.
Myler, John J.
Myler, Bonnie L.
Niederberger, Thomas
Niederberger, Susan R.
Noble, Andrew G.
Noble, Carol A.
Sch.I-2
<PAGE>
Olvena, Jr., Florentino D.
Olvena, Erfinde
Pilesi, William D.
Pilesi, Marion E.
Plovic, Wayne, F.
Plovic, Jennifer A.
Prater, N.H.
Reeher, Joseph G.
Reeher, Sharon S.
Ries, Timothy R.
Schaming, M. Claire
Schaum, James L.
Sebbens, Jr., Joseph S.
Shaw, David A.
Slelme, George L.
Smith, Raymond
Smith, Stephen T.
Smith, Susan E.
Smrek, Martin G.
Snyder, Michael W.
Snyder, Linda L.
Stadel, Paul A.
Stadel, Jolene R.
Stephenson, Jack L.
Stephenson, Lynne, F.
Surrency, Donald R.
Surrency, Susan
Sutherland, Ren M.
Swearingen, William E.
Swearingen, Geraldine E.
Sweeney, Clayton, A.
Sweeney, Sally D.
Sweet, Jr., Donald N.
Swenson, III, Swen E.
Swenson, Karen E.
Theroff, Jr., John J.
Theroff, Eileen A.
Thomas, Richard K.
Turner, Walter W.
Volkman, Cecil H.
Volkman, Rosemary A.
Wagner, Robert K.
Walbaum, Richard W.
Walbaum, Sandra V.
Wiley, III James A.
Wilson, Brooks C.
Wilson, III William P.
Winkler, Steven E.
Winkler, Heidi
Wisnlewski, Frances A.
Wisnlewski, Dennis W.
Wrotney, James A.
Wrotney, Gay W.
Zaleski, Randall, P.
Zaleski, Helen M.
Sch.I-3
<PAGE>
Exhibit 4.4
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of December 1, 1997
by and among
KOPPERS INDUSTRIES, INC.
THE SUBSIDIARY GUARANTORS NAMED HEREIN
and
SBC WARBURG DILLON READ INC.
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (the "Agreement") is made and
---------------
entered into as of December 1, 1997 by and among KOPPERS INDUSTRIES, INC., a
Pennsylvania corporation (the "Company"), the SUBSIDIARY GUARANTORS (as defined
-------
herein) and SBC WARBURG DILLON READ INC. (the "Initial Purchaser"). The
-----------------
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchaser to purchase $175,000,000 of the Company's 9 7/8% Senior
Subordinated Notes due 2007 under the Purchase Agreement, dated as of November
20, 1997 (the "Purchase Agreement"), by and among the Company, the Subsidiary
------------------
Guarantors and the Initial Purchaser.
The Company, the Subsidiary Guarantors and the Initial Purchaser
hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended, and the rules and
---
regulations promulgated by the Commission pursuant thereto.
Action: As defined in Section 8(c) of this Agreement.
------
Broker-Dealer: Any broker or dealer registered under the Exchange
-------------
Act.
Closing Date: The date that the Notes are purchased by the Initial
------------
Purchaser pursuant to the Purchase Agreement.
Commission: The Securities and Exchange Commission.
----------
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
----------
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Notes to be issued in the Exchange Offer, (ii) the maintenance
of such Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the minimum period required
pursuant to Section 3(b) of this Agreement and (iii) the delivery by the Company
to the Registrar under the Indenture of New Notes in the same aggregate
principal amount as the aggregate principal amount of Old Notes that were so
tendered.
Damages Payment Date: With respect to the Notes, each Interest
--------------------
Payment Date.
Effectiveness Target Date: As defined in Section 5 of this Agreement.
-------------------------
<PAGE>
-2-
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated by the Commission pursuant thereto.
Exchange Offer: The registration under the Act by the Company and the
--------------
Subsidiary Guarantors of the New Notes pursuant to a Registration Statement
pursuant to which the Company and the Subsidiary Guarantors offer the Holders of
all outstanding Transfer Restricted Securities the opportunity to exchange all
such outstanding Old Notes that are Transfer Restricted Securities held by such
Holders for New Notes in an aggregate principal amount equal to the aggregate
principal amount of the Old Notes that are Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Effective Date: The dated on which the Exchange Offer
-----------------------------
Registration Statement is declared effective by the Commission.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
--------------
proposes to sell the Notes to (i) certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act, and (ii) other eligible
purchasers pursuant to Regulation S under the Act.
Holders: As defined in Section 2(b) of this Agreement.
-------
Indenture: The Indenture, dated as of December 1, 1997, by and among
---------
the Company, the Subsidiary Guarantors and PNC Bank, National Association, as
trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such
-------
Indenture is amended or supplemented from time to time in accordance with its
terms.
Initial Purchaser: SBC Warburg Dillon Read Inc.
-----------------
Interest Payment Date: As defined in the Notes.
---------------------
NASD: National Association of Securities Dealers, Inc.
----
New Notes: The Company's 9 7/8% Senior Subordinated Notes due 2007 to
---------
be issued pursuant to the Indenture in connection with the Exchange Offer and
evidencing the same debt
<PAGE>
-3-
as the Old Notes, including the guarantees by the Subsidiary Guarantors.
Notes: Old Notes and New Notes.
-----
Old Notes: The Company's 9 7/8% Senior Subordinated Notes due 2007 to
---------
be issued pursuant to the Indenture on the Closing Date, including the
guarantees by the Subsidiary Guarantors.
Participating Broker Dealer: As defined in Section 6(a)(iii) of this
---------------------------
Agreement.
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
and supplements thereto, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such Prospectus.
Registration Default: As defined in Section 5 of this Agreement.
--------------------
Registration Statement: Any registration statement of the Company and
----------------------
the Subsidiary Guarantors relating to (a) an offering of New Notes pursuant to
an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement that is filed pursuant
to the provisions of this Agreement, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including pre- and
post-effective amendments) and all exhibits and material incorporated by
reference or deemed to be incorporated by reference, if any, therein.
Shelf Filing Deadline: As defined in Section 4(a) of this Agreement.
---------------------
Shelf Registration Statement: As defined in Section 4(a) of this
----------------------------
Agreement.
Subsidiary: With respect to any Person, any other Person of which a
----------
majority of the equity ownership or the voting securities is at the time owned,
directly or indirectly, by such
<PAGE>
-4-
Person or by one or more other subsidiaries of such Person or a combination
thereof.
Subsidiary Guarantors: Each Subsidiary of the Company that, pursuant
---------------------
to the Indenture, is, or is required to become, a guarantor of the obligations
of the Company under the Notes and the Indenture.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C. Section
---
77aaa-77bbbb), as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until the earliest to occur
------------------------------
of (i) the date on which each such Old Note has been exchanged by a person other
than a Broker-Dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a Broker-Dealer in the Exchange Offer of an Old Note for a New Note,
the date on which such New Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note has been effectively registered under the Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an un derwriter for reoffering to
the public pursuant to an effective Registration Statement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
------------------------------
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
-----------------------------------------
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
------
Person beneficially owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless, due to a change in law or Commission policy after the date
hereof, the Exchange Offer shall not be permissible under applicable federal law
or Commission policy, the Company and the Subsidiary Guarantors shall (i) cause
to be
<PAGE>
-5-
filed with the Commission as soon as practicable on or prior to 45 days after
the Closing Date, a Registration Statement under the Act relating to the New
Notes and the Exchange Offer and (ii) use their best efforts to cause such
Registration Statement to be declared effective by the Commission as soon as
practicable on or prior to 90 days after the Closing Date. In connection with
the foregoing, the Company and the Subsidiary Guarantors shall (A) file all pre-
effective amendments to such Registration Statement as may be necessary to cause
such Registration Statement to become effective, (B) if applicable, file a post-
effective amendment to such Registration Statement pursuant to Rule 430A under
the Act, (C) cause all necessary filings in connection with the registration and
qualification of the New Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer
(provided, however, that the Company and the Subsidiary Guarantors shall not be
obligated to qualify as foreign corporations in any jurisdiction in which they
are not so qualified or to take any action that would subject them to general
service of process or taxation in any jurisdiction where they are not so
subject, except service of process with respect to the offering and sale of the
Notes and Exchange Notes) and (D) upon the effectiveness of such Registration
Statement, commence the Exchange Offer and use their best efforts to issue on or
prior to 45 days after the Exchange Offer Effective Date, New Notes in exchange
for all Old Notes tendered in the Exchange Offer. The Exchange Offer shall be
on the appropriate form permitting registration of the New Notes to be offered
in exchange for the Transfer Restricted Securities and to permit resales of New
Notes held by Broker-Dealers as contemplated by Section 3(c) below. If, after
such Exchange Offer Registration Statement initially is declared effective by
the Commission, the Exchange Offer or the issuance of New Notes under the
Exchange Offer or the resale of New Notes received by Broker-Dealers in the
Exchange Offer as contemplated by Section 3(c) below is inter fered with by any
stop order, injunction or other order or requirement of the Commission or any
other governmental agency or court, such Registration Statement shall be deemed
not to have become effective for purposes of this Agreement during the period
that such stop order, injunction or other similar order or requirement shall
remain in effect.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
-------- -------
event shall such period be less than 20
<PAGE>
-6-
business days. The Company and the Subsidiary Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
The Company and the Subsidiary Guarantors shall only offer to exchange New Notes
for Old Notes in the Exchange Offer, and only the New Notes shall be registered
under the Exchange Offer Registration Statement.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus included in the Exchange Offer Registration
Statement that any Broker-Dealer that holds Old Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such Old
Notes pursuant to the Exchange Offer; provided, however, that such Broker-Dealer
-------- -------
may be deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with any resales of the New Notes received by such Broker-Dealer in
the Exchange Offer. Such "Plan of Distribution" section shall allow the use of
the Prospectus by all Persons subject to the prospectus delivery requirements of
the Act, including Participating Broker-Dealers, and shall also contain all
other information with respect to such resales by Broker-Dealers that the
Commission may require to permit such resales pursuant thereto, but such "Plan
of Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company and the Subsidiary Guarantors shall use their best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time. The Company shall provide
sufficient copies of the latest version of such Prospectus to Broker-Dealers
promptly upon request at any time during such period in order to facilitate such
resales.
<PAGE>
-7-
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Subsidiary
------------------
Guarantors are not required to file an Exchange Offer Registration Statement or
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 shall notify the Company within 20 business days of the commencement
of the Exchange Offer that such Holder (A) is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) 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 Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (C) is a Broker-Dealer and holds Old Notes (including the Initial
Purchaser who holds Old Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from the Company or one of its
affiliates or (iii) the Company and the Subsidiary Guarantors do not consummate
the Exchange Offer within 45 days following the effectiveness date of the
Exchange Offer Registration Statement, then the Company and the Subsidiary
Guarantors shall (x) cause to be filed a shelf registration statement pursuant
to Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration Statement"), on
----------------------------
or prior to the earliest to occur of (1) the 45th day after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement or (2) the 45th day after the date on which the Company
receives notice from a Holder of Transfer Re stricted Securities as contemplated
by clause (ii) above (such earliest date being the "Shelf Filing Deadline"),
---------------------
which Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) of this Agreement, and (y) use its best
efforts to cause such Shelf Registration Statement to be declared effective by
the Commission on or before the 90th day after the Shelf Filing Deadline. The
Company and the Subsidiary Guarantors shall use their best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) of this Agreement to the
extent necessary to ensure that it is available for resales of Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a) and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a continuous period of two years following the
date on
<PAGE>
-8-
which such Shelf Registration Statement becomes effective under the Act or such
shorter period that will terminate when all the Notes covered by the Shelf
Registration Statement have been sold pursuant to such Shelf Registration
Statement.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 15 business days after receipt of a request
therefor, such information regarding such Holder as the Company may reasonably
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included in such Shelf Registration
Statement. Each Holder as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed to make the information previously furnished to the Company by such
Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
-------------------------
Exchange Offer has not been Consummated within 45 business days after the
Exchange Offer Effective Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or
usable in connection with resales of Transfer Restricted Securities during the
periods required by this Agreement (each such event referred to in clauses (i)
through (iv), a "Registration Default"), the Company and the Subsidiary
--------------------
Guarantors hereby agree to 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 per $1,000 principal amount of Notes constituting Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of Notes
constituting Transfer Restricted Securities with respect to each subsequent 90-
day
<PAGE>
-9-
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of $.30 per week per $1,000 in principal amount of Notes
constituting Transfer Restricted Securities. Notwithstanding the foregoing, the
Company and the Subsidiary Guarantors shall not be required to pay liquidated
damages to each Holder of Transfer Restricted Securities if the Registration
Default arises from the failure of the Company and the Subsidiary Guarantors to
file, or cause to become effective, a Shelf Registration Statement within the
time period required by Section 4 of this Agreement and such Registration
Default is by reason of the failure of the Holders to provide the information
regarding the Holder reasonably requested by the Company, the NASD or any other
regulatory agency having jurisdiction over any of the Holders at least 10
business days prior to such Registration Default. All accrued liquidated
damages shall be paid by the Company and the Subsidiary Guarantors on each
Damages Payment Date to the Holders by wire transfer of immediately available
funds or by federal funds check and to the Holders of certificated securities by
mailing a check to such Holders' registered addresses. Following the cure of
all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of liquidated damages with respect to such Transfer
Restricted Securities will cease.
All obligations of the Company and the Subsidiary Guarantors set forth
in the preceding paragraph that are outstanding with respect to any Transfer
Restricted Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect to
such Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company and the Subsidiary Guarantors shall comply with all
of the provisions of Section 6(c) below, shall use their best efforts to effect
such exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If, due to a change in law or Commission policy after the date
hereof, in the reasonable opinion of special counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
federal law or Commission policy, the Company hereby agrees to seek a no-
<PAGE>
-10-
action letter or other favorable decision from the Commission allowing the
Company and the Subsidiary Guarantors to Consummate an Exchange Offer for
such Old Notes. The Company hereby agrees to pursue the issuance of such a
no-action letter or favorable decision to the Commission staff level but
shall not be required to take commercially unreasonable action to effect a
change of Commission policy. The Company hereby agrees, however, to (A)
participate in telephonic conferences with the Commission, (B) deliver to
the Commission an analysis prepared by special counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution (which need not be favorable) by the
Commission of such submission. The Initial Purchaser shall be given prior
notice of any action taken by the Company under this clause (i).
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of the Company, prior to the
Consummation of the Exchange Offer, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company or any of the Subsidiary Guarantors, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Notes to be issued in the Exchange Offer and (C) it is acquiring the New
Notes in its ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities shall otherwise cooperate in the Company's
preparations for the Exchange Offer.
(iii) The Company, the Subsidiary Guarantors and the Initial
Purchaser acknowledge that the staff of the Commission has taken the
position that any broker-dealer that owns New Notes that were received by
such broker-dealer for its own account in the Exchange Offer (a
"Participating Broker-Dealer") may be deemed to be an "underwriter" within
----------------------------
the meaning of the Act and must deliver a prospectus meeting the
requirements of the Act in connection with any resale of such New Notes
(other than a resale of an unsold allotment resulting from the original
offering of the Notes).
The Company, the Subsidiary Guarantors and the Initial Purchaser also
acknowledge that it is the Commission staff's
<PAGE>
-11-
position that if the Prospectus contained in the Exchange Offer
Registration Statement includes a plan of distribution containing a
statement to the above effect and the means by which Participating Broker-
Dealers may resell the New Notes, without naming the Participating Broker-
Dealers or specifying the amount of New Notes owned by them, such
Prospectus may be delivered by Participating Broker-Dealers to satisfy
their prospectus delivery obligations under the Act in connection with
resales of New Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Act.
(b) Shelf Registration Statement. In the event that a Shelf
----------------------------
Registration Statement is required by this Agreement, the Company and the
Subsidiary Guarantors shall comply with all the provisions of Section 6(c) of
this Agreement and shall use their best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution of such Transfer Restricted
Securities and, in connection therewith, the Company and the Subsidiary
Guarantors will as expeditiously as possible prepare and file with the
Commission a Shelf Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution of such Transfer Restricted Securities.
(c) General Provisions. In connection with any Registration Statement
------------------
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus, to the extent that the same are required
to be available to permit resales of Notes by Broker-Dealers), the Company and
the Subsidiary Guarantors shall:
(i) use their best efforts to keep such Registration Statement
continuously effective for the applicable time period required hereunder
and provide all requisite financial statements (including, if required by
the Act or any regulation thereunder, financial statements of the
Subsidiary Guarantors) for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the
<PAGE>
-12-
Company shall promptly notify the Holders to suspend use of the Prospectus,
and the Holders shall suspend use of the Prospectus, and such Holders shall
not communicate non-public information to any third party, in violation of
the securities laws, until the Company and the Subsidiary Guarantors have
made an appropriate amendment to such Registration Statement, in the case
of clause (A), correcting any such misstatement or omission, and, in the
case of either clause (A) or (B), the Company and the Subsidiary Guarantors
shall use their best efforts to cause such amendment to be declared
effective and such Registration Statement and the related Prospectus to
become usable for their intended purpose(s) as soon as practicable
thereafter;
(ii) prepare and file with the Commission such amendments and post-
effective amendments to such Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 of this Agreement, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered by
such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act during the applicable time
period required hereunder and to comply fully with the applicable
provisions of Rules 424 and 430A under the Act in a timely manner; and
comply with the provisions of the Act and the Exchange Act with respect to
the disposition of all Transfer Restricted Securities covered by such
Registration Statement during such period in accordance with the intended
method or methods of distribution by the sellers of such securities set
forth in such Registration Statement as so amended or in such Prospectus as
so supplemented;
(iii) advise the underwriter(s), if any, the Initial Purchaser,
and, in the case of a Shelf Registration Statement, each of the selling
Holders promptly and, if requested by such Persons, to confirm such advice
in writing, (A) when the Prospectus or any prospectus supplement or post-
effective amendment has been filed and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or
for additional information relating to such Registration Statement or
Prospectus,
<PAGE>
-13-
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement to such Registration Statement or
Prospectus, as the case may be, or any document incorporated by reference
in such Registration Statement or Prospectus untrue in any material
respect, or that requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements in
such Registration Statement or Prospectus not misleading and that in the
case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time
the Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Transfer Restricted Securities under
state securities or Blue Sky laws, the Company and the Subsidiary
Guarantors shall use their best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) furnish to each of the underwriter(s), if any, the Initial
Purchaser and, in the case of a Shelf Registration Statement, each of the
selling Holders before filing with the Commission, copies of any
Registration Statement or any Prospectus included in such Registration
Statement or Prospectus or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement),
which documents will be subject to the reasonable review of such
underwriter(s), if any, the Initial Purchaser, and such Holders for a
period of at least five business days, and the Company and the Subsidiary
Guarantors will not file any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus, as the case may be, (including all such documents incorporated
by reference) to which any underwriter, Initial Purchaser or
<PAGE>
-14-
selling Holder shall reasonably object within five business days after the
receipt of such Registration Statement or Prospectus. A selling Holder or
underwriter, if any, shall be deemed to have reasonably objected to such
filing if such Registration Statement, Prospectus, amendment or supplement,
as applicable, as proposed to be filed, contains a material misstatement or
omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, (a)
provide copies of such document to the selling Holders and to the
underwriter(s), if any, (b) make the Company's and the Subsidiary
Guarantors' representatives available for discussion of such document and
other customary due diligence matters; provided that such discussion and
--------
due diligence shall be coordinated on behalf of the selling Holders by one
counsel designated by and on behalf of such selling Holders and (c) include
such information in such document prior to the filing of such document as
such selling Holders or underwriter(s), if any, may reasonably request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), if any, at the offices
where normally kept, during reasonable business hours, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and the Subsidiary Guarantors and cause the Company's and
the Subsidiary Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter, attorney
or accountant in connection with such Registration Statement subsequent to
the filing thereof and prior to its effectiveness; provided, however, that
-------- -------
such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such persons, unless and to the extent that
(i) disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities,
(ii) disclosure of such information is required by law (including any
disclosure requirements pursuant to federal securities laws in connection
with the filing of the Shelf Registration Statement or the use of any
Prospectus), (iii) such
<PAGE>
-15-
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
person or (iv) such information becomes available to such person from a
source other than the Company and its Subsidiaries and such source is not
bound by a confidentiality agreement;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid for Transfer Restricted Securities and any other
terms of the offering of the Transfer Restricted Securities to be sold in
such offering; and make all required filings of such Prospectus supplement
or post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
-------- -------
required to take any action pursuant to this Section 6(c)(vii) that would,
in the opinion of counsel for the Company, violate applicable law;
(viii) furnish to each underwriter, if any, the Initial Purchaser
and upon request to the Company to a selling Holder without charge, at
least one conformed copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, including, upon the request
of such Person, all documents incorporated by reference therein and all
exhibits to the extent requested (including exhibits incorporated therein
by reference);
(ix) deliver to each selling Holder, each of the underwriter(s), if
any, and the Initial Purchaser, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Company and
the Subsidiary Guarantors hereby consent to the use of the Prospectus and
any amendment or supplement to the Prospectus by each of the selling
Holders and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities in accordance
<PAGE>
-16-
with the terms thereof and with U.S. Federal securities laws and Blue Sky
laws covered by the Prospectus or any amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings of
securities of this type) and take all such other reasonable actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities pursuant to any Registration Statement
contemplated by this Agreement, all as may be reasonably requested by any
Holder of Transfer Restricted Securities or the underwriter(s), if any, in
connection with any sale or resale of Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or not
the registration is an Underwritten Registration, the Company and the
Subsidiary Guarantors shall (i) make such representations and warranties
to the Holders of such Transfer Restricted Securities and the underwriters,
if any, with respect to the business of the Company and its Subsidiaries
(including with respect to businesses or assets acquired or to be acquired
by any of them), and the Shelf Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings, and confirm the same
if and when customarily requested; (ii) obtain opinions of counsel to the
Company and the Subsidiary Guarantors and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the underwriters, if any, and special counsel to the
Holders of the Transfer Restricted Securities being sold), addressed to
each selling Holder of Transfer Restricted Securities and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such underwriters, if any, and special counsel to
Holders of Transfer Restricted Securities; (iii) use their best efforts to
obtain customary "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary,
any other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company or any such subsidiary
for which financial statements and financial data is, or is required to be,
included in the Registration Statement),
<PAGE>
-17-
addressed (where reasonably possible) to each selling Holder of Transfer
Restricted Securities and each of the underwriters, if any, such letters to
be in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings; (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set forth in Section 8
hereof (or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Transfer Restricted Securities
covered by such Shelf Registration Statement and the underwriters, if any);
and (v) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold and the underwriters, if any, to
evidence the continued validity of the representations and warranties made
pursuant to clause (i) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company.
If at any time the representations and warranties of the Company and
the Subsidiary Guarantors contemplated in clause (A)(1) above cease to be true
and correct, the Company shall so advise the Initial Purchaser and the
underwriter(s), if any, and each selling Holder promptly and, if requested by
any of them, shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with and cause the Subsidiary Guarantors to cooperate
with the selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification (or exemption
from such registration or qualification) of the Transfer Restricted
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the selling Holders and underwriter(s), if any, may
reasonably request in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the Registration Statement;
provided, however, that neither the Company nor the Subsidiary Guarantors
-------- -------
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process or to taxation, other than as to matters and
transactions relating to the
<PAGE>
-18-
Registration Statement, in any jurisdiction where it is not now so subject;
(xii) if a Shelf Registration is filed pursuant to Section 2(b),
cooperate with the selling Holders of Registrable Securities and the
managing Underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to be
sold, which certificates shall not bear any restrictive legends and shall
be in a form eligible for deposit with The Depository Trust Company; and
enable such Transfer Restricted Securities to be in such denominations and
registered in such names as the managing Underwriters, if any, or Holders
may reasonably request;
(xiii) in connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with and cause the Subsidiary
Guarantors to cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and enable such Transfer Restricted Securities to be
in such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xiv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers of such Transfer Restricted
Securities or the underwriter(s), if any, to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained in
clause (xi) above;
(xv) if any fact or event contemplated by Section 6(c)(iii)(D) of
this Agreement shall exist or have occurred, prepare a supplement or post-
effective amendment to the Registration Statement or related Prospectus or
any document incorporated in such Registration Statement or Prospectus by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Registration Statement will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
<PAGE>
-19-
therein not misleading and the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities that are in a form eligible for deposit
with The Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD);
(xviii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission in regards to any
Registration Statement, and make generally available to its
securityholders, as soon as practicable, a consolidated earning statement
of the Company meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm commitment or reasonable best efforts Underwritten
Offering or (B) if not sold to underwriters in such an offering, beginning
with the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement;
(xix) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture, if any, as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute, and use its best efforts to cause the Trustee to
execute, all customary documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner.
<PAGE>
-20-
Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) of this Agreement, such Holder
will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
6(c)(xv) of this Agreement, or until it is advised in writing (the "Advice") by
------
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event that the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 of this Agreement, as applicable, shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 6(c)(iii)(D) of this Agreement to
and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) of this Agreement or shall have
received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All fees and expenses incident to the Company's and the Subsidiary
Guarantors' performance of or compliance with this Agreement will be borne by
the Company regardless of whether a Registration Statement becomes effective,
including without limitation: (i) all registration and filing fees and expenses
(including filings made with the NASD (and, if applicable, the fees and expenses
of any "qualified independent underwriter" and its counsel that may be required
by the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Notes to
be issued in the Exchange Offer and printing of Prospectuses); (iv) all fees and
disbursements of counsel for the Company, the Subsidiary Guarantors and, subject
to Section 7(b) below, the Holders of Transfer Restricted Securities; and (v)
all fees and disbursements of independent certified public accountants of the
Company and the Subsidiary Guarantors
<PAGE>
-21-
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company and the Subsidiary Guarantors will, in any event, bear
their internal expenses (including, without limitation, all salaries and
expenses of their officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by them.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, each Holder of Transfer Restricted Notes shall pay all underwriting
discounts and commissions of any underwriters with respect to any Notes sold by
or on behalf of it.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchaser and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Cahill Gordon & Reindel or such other counsel as may be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and the Subsidiary Guarantors, on a joint and
several basis, agrees to indemnify and hold harmless (i) the Initial Purchaser,
each Holder of Transfer Restricted Securities and each Participating Broker
Dealer, (ii) each person, if any, who controls any of the foregoing within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act (any of the
persons referred to in this clause (ii) being hereinafter referred to as a
"controlling person") and (iii) its agents, employees, officers and directors
- -------------------
and the agents, employees, officers and directors of any such controlling person
(collectively, the "Indemnified Persons") from and against any and all losses,
-------------------
liabilities, claims, damages and expenses whatsoever (including but not limited
to reasonable attorneys' fees and any and all reasonable expenses whatsoever
incurred in investigating, preparing or defending against any litigation,
<PAGE>
-22-
commenced or threatened, or any claim whatsoever, and any and all reasonable
amounts paid in settlement of any claim or litigation) to which they or any of
them may become subject under the Act, the Exchange Act or otherwise, insofar as
such losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
Prospectus, or in any amendment thereof or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company and the Subsidiary Guarantors will not be
- -------- -------
liable in any such case to the extent, but only to the extent, that any such
loss, liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Indemnified Person
relating to such Indemnified Person expressly for use therein. This indemnity
agreement will be in addition to any liability that the Company and the
Subsidiary Guarantors may otherwise have, including, but not limited to,
liability under this Agreement.
If any action is brought against any Indemnified Persons or any such
person in respect of which indemnity may be sought against the Company and the
Subsidiary Guarantors pursuant to the foregoing paragraph, such Indemnified
Persons or such person shall promptly notify the indemnifying party in writing
of the institution of such action and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses,
provided, however, except to the extent that the indemnifying party shall be
materially prejudiced thereby (through the forfeiture of substantive rights or
defenses), that the omission to so notify the indemnifying party shall not
relieve the indemnifying party from any liability which they may have to the
Indemnified Persons or any such person or otherwise. Such Indemnified Persons
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Persons
unless the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such action or the
indemnifying party shall not have employed counsel to have charge of the defense
of such action or such indemnified party or parties shall have reasonably
concluded that there may be defenses available to
<PAGE>
-23-
it or them which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events such fees and expenses shall be borne by the
indemnifying party and paid as incurred (it being understood, however, that the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (together with appropriate local counsel) in any one action or
series of related actions in the same jurisdiction representing the indemnified
parties who are parties to such action). The indemnifying party shall not be
liable for any settlement of any such claim or action effected without its
written consent but if settled with the written consent of the indemnifying
party, the indemnifying party agrees to indemnify and hold harmless any
Indemnified Persons and any such person from and against any loss or liability
by reason of such settlement. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second sentence of this paragraph, then the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 60 business
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement and (iii) such
indemnified party shall have given the indemnifying party at least 30 days'
prior notice of its intention to settle. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(b) In connection with any Registration Statement pursuant to which a
Holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company and the Subsidiary Guarantors, their respective directors
and officers and any person controlling the Company or a Subsidiary Guarantor
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, and each of their agents, employees, officers and directors and
the agents, employees, officers and directors of such controlling person from
<PAGE>
-24-
and against any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees and any and all
reasonable expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever and any
and all reasonable amounts paid in settlement of any claim or litigation) to
which they or either of them may become subject under the Act, the Exchange Act
or otherwise insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information relating to such Holder furnished to the Company by such Holder
expressly for use in such Registration Statement.
If any action is brought against the Company or the Subsidiary
Guarantors or any such person in respect of which indemnity may be sought
against any Holder of Transfer Restricted Securities pursuant to foregoing
paragraph, the Company, the Subsidiary Guarantors or such person shall promptly
notify such Holder in writing of the institution of such action and such Holder
shall assume the defense of such action, including the employment of counsel
reasonably satisfactory to such indemnified party and payment of all fees and
expenses, provided, however, except to the extent that the indemnifying party
shall be materially prejudiced thereby (through the forfeiture of substantive
rights or defenses), that the omission to so notify such Holder shall not
relieve such Holder from any liability which they may have to the Company, the
Subsidiary Guarantors or any such person or otherwise. The Company, the
Subsidiary Guarantors or such person shall have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of the Company or such person unless the employment of such counsel
shall have been authorized in writing by such Holder of Transfer Restricted
Securities in connection with the defense of such action or such Holder shall
not have employed counsel to have charge of the defense of such action or such
indemnified party or parties shall have reasonably concluded that there may be
defenses available to it or them
<PAGE>
-25-
which are different from or additional to those available to such Holder (in
which case such Holder shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties, but such Holder may employ
counsel and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such Holder), in any of which events such
fees and expenses shall be borne by such Holder and paid as incurred (it being
understood, however, that such Holder shall not be liable for the expenses of
more than one separate counsel in any one action or series of related actions in
the same jurisdiction representing the indemnified parties who are parties to
such action). Anything in this paragraph to the contrary notwithstanding, any
Holder of Transfer Restricted Securities shall not be liable for any settlement
of any such claim or action effected without the written consent of such Holder
but if settled with the written consent of such Holder, such Holder agrees to
indemnify and hold harmless the Company, the Subsidiary Guarantors and any such
person from and against any loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second sentence of this
paragraph, then the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 business days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
not have reimbursed the indemnifying party in accordance with such request prior
to the date of such settlement and (iii) such indemnified party shall have given
the indemnifying party at least 30 days' prior notice of its intention to
settle. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened proceeding
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party, unless
such settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(c) In order to provide for contribution in circumstances in which the
indemnification provided for in paragraphs (a) and (b) of this Section 8 is for
any reason held to be unavailable from the indemnifying party, or is
insufficient to hold harmless a party indemnified under this Section 8, the
Company, the Subsidiary Guarantors and the Indemnified Parties shall contribute
to the aggregate losses, claims, damages,
<PAGE>
-26-
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action or any claims
asserted) to which the Company, and/or the Subsidiary Guarantors and the
Indemnified Parties may be subject, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Subsidiary
Guarantors, on the one hand, and the Indemnified Parties, on the other hand,
from the offering of the Old Notes or, (ii) if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Subsidiary Guarantors, on the one hand, and the Indemnified
Parties, on the other hand, in connection with the statements or omissions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received by
the Company and the Subsidiary Guarantors, on the one hand, and the Indemnified
Parties, on the other hand, shall be deemed to be in the same proportion as the
total proceeds from the offering of Old Notes (net of discounts but before
deducting expenses) received by the Company as set forth in the table on the
cover page of the Offering Memorandum bear to the total proceeds received by
such Holder with respect to its sale of Transfer Restricted Securities or New
Notes. The relative fault of the Company and the Subsidiary Guarantors, on the
one hand, and the Indemnified Parties, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Subsidiary Guarantors or the
Indemnified Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Subsidiary Guarantors and the Initial Purchaser agree
that it would not be just and equitable if contribution pursuant to this
paragraph (c) of this Section 8 were determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of paragraph
(c) of this Section 8, (i) in no case shall an Indemnified Party be required to
contribute any amount in excess of the amount by which the total received by
such Indemnified Party with respect to its sale of its Transfer Restricted
Securities or New Notes, as the case may be, exceeds the amount of any damages
that such Indemnified Party has otherwise been required to pay by reason of any
untrue or alleged untrue
<PAGE>
-27-
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (c) of this
Section 8, each person, if any, who controls an Indemnified Party within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Indemnified Party, and each person, if
any, who controls the Company or the Subsidiary Guarantors within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Company or the Subsidiary Guarantors, subject in
each case to clauses (i) and (ii) of this paragraph. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
Action against such party in respect of which a claim for contribution may be
made against another party or parties under this paragraph 8(c), notify such
party or parties from whom contribution may be sought, but, except to the
extent that the indemnifying party shall be materially prejudiced thereby
(through the forfeiture of substantive rights and defenses), the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
paragraph (c) or otherwise. No party shall be liable for contribution with
respect to any action or claim settled without its written consent; provided,
--------
however, that such written consent was not unreasonably withheld.
- -------
SECTION 9. RULE 144A
The Company and the Subsidiary Guarantors shall use their best
efforts, for so long as any Transfer Restricted Securities remain outstanding,
to make available to any Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale of such securities and any prospective
purchaser of such Transfer Restricted Securities from such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration under this
Agreement unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled under this Agreement to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers
<PAGE>
-28-
of attorneys, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
--------
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise
--------
all rights provided in this Agreement, in the Indenture, the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The
Company and the Subsidiary Guarantors agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agree to waive the defense in any Action
for specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Each of the Company and the
--------------------------
Subsidiary Guarantors will not on or after the date of this Agreement enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions of this Agreement. The Company have not previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders under this Agreement do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's securities under any agreement in effect on the date of
this Agreement.
(c) Adjustments Affecting the Notes. Without the written consent of
-------------------------------
the Holders of a majority in aggregate principal amount of outstanding Transfer
Restricted Notes, the Company and the Subsidiary Guarantors will not take any
action, or permit any change to occur, with respect to the Notes that
<PAGE>
-29-
would materially and adversely affect the ability of the Holders to Consummate
any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions of this Agreement may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions of this
Agreement that relates exclusively to the rights of Holders whose securities are
being sold or tendered pursuant to a Registration Statement and that does not
affect directly or indirectly the rights of other Holders whose securities are
not being sold or tendered pursuant to such Registration Statement may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities being so sold or tendered.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivering, first-class
mail (registered or certified, return receipt requested), telex, telecopier or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Subsidiary Guarantors, at:
Koppers Industries, Inc.
436 Seventh Avenue
Pittsburgh, Pennsylvania 15219
Facsimile: (412) 227-2935
Attention: Chief Financial Officer
with a copy to:
Dickie, McCamey & Chilcote, P.C.
Two PPG Place, Suite 400
Pittsburgh, Pennsylvania 15222
Facsimile: (412) 392-5367
Attention: George R. Fox III, Esq.
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if
<PAGE>
-30-
personally delivered; (ii) five business days after being deposited in the mail,
postage prepaid, if mailed; (iii) when answered back, if telexed; (iv) when
receipt acknowledged, if telecopied; and (v) on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties to this Agreement 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.
(h) Captions. The captions included in this Agreement are included
--------
solely for convenience of reference and are not to be considered a part of this
Agreement.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Submission to Jurisdiction. The Company and the Subsidiary
--------------------------
Guarantors irrevocably submit to the nonexclusive jurisdiction of any State or
Federal court sitting in New York over any suit, action or proceeding arising
out of or relating to this agreement. The Company and the Subsidiary Guarantors
irrevocably waive, to the fullest extent permitted by law, any objection it may
now or thereafter have to the laying of venue of any such court and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Company and the Subsidiary Guarantors
agree that a final judgment in any such suit, action or proceeding brought in
any such court shall be conclusive and binding upon the Company and the
Subsidiary Guarantors and may be enforced in any other courts to the
jurisdiction of which the Company and the Subsidiary Guarantors are or may be
subject, by suit upon such judgment. The Company and the Subsidiary Guarantors
hereby appoint, without power of revocation, CT
<PAGE>
-31-
Corporation System as its agent to accept and acknowledge on its behalf service
of any and all process which may be served in any suit, action or proceeding
arising out of or relating to this letter.
(k) Severability. In the event that any one or more of the provisions
------------
contained in this Agreement, or the application of any such provision in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained in this Agreement shall not be affected or
impaired thereby.
(l) Entire Agreement. This Agreement together with the other
----------------
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties to
this Agreement in respect of the subject matter contained in this Agreement.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to in this Agreement with respect to the
registration rights granted by the Company with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
[Signatures on Next Page]
<PAGE>
-32-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
KOPPERS INDUSTRIES, INC.
/s/ Clayton A. Sweeney
By:_________________________
Name: Clayton A. Sweeney
Title: Director
KOPPERS INDUSTRIES INTERNATIONAL
TRADE CORP.
/s/ Randall D. Collins
By:________________________
Name: Randall D. Collins
Title: Secretary
WORLD WIDE VENTURES CORPORATION
/s/ Randall D. Collins
By:________________________
Name: Randall D. Collins
Title: Secretary
KOPPERS INDUSTRIES OF DELAWARE,
INC.
/s/ M. Claire Schaming
By:________________________
Name: M. Claire Schaming
Title: Secretary and Treasurer
<PAGE>
-33-
KOPPERS CONCRETE PRODUCTS, INC.
/s/ Randall D. Collins
By:________________________
Name: Randall D. Collins
Title: Secretary
CONCRETE PARTNERS INC.
/s/ Randall D. Collins
By:________________________
Name: Randall D. Collins
Title: Secretary
KOPPERS INDUSTRIES B.W., INC.
/s/ Randall D. Collins
By:________________________
Name: Randall D. Collins
Title: Secretary
KOPPERS FOREIGN INVESTMENT
CORPORATION
/s/ M. Claire Schaming
By:________________________
Name: M. Claire Schaming
Title: Assistant Secretary
<PAGE>
-34-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
written.
Date: December 1, 1997
- -----
KOPPERS AUSTRALIA PTY LTD.
/s/ Randall Collins
By:______________________________
Name: Randall Collins
Title: Under Power of Attorney
CONTINENTAL CARBON AUSTRALIA
PTY LTD.
/s/ Randall Collins
By:______________________________
Name: Randall Collins
Title: Under Power of Attorney
KOPPERS TIMBER PRESERVATION
PTY LTD.
/s/ Randall Collins
By:______________________________
Name: Randall Collins
Title: Under Power of Attorney
KOPPERS COAL TAR PRODUCTS PTY
LTD.
/s/ Randall Collins
By:______________________________
Name: Randall Collins
Title: Under Power of Attorney
KOPPERS SHIPPING PTY LTD.
/s/ Randall Collins
By:______________________________
Name: Randall Collins
Title: Under Power of Attorney
<PAGE>
-35-
Confirmed and Accepted and agreed as of the date
first above written:
SBC WARBURG DILLON READ INC.
By: /s/ Kaj Ahlburg
-------------------------
Name: Kaj Ahlburg
Title: Executive Director
By: /s/ Daniel H. Chu
-------------------------
Name: Daniel H. Chu
Title: Executive Director
<PAGE>
Exhibit 10.19
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (the "Agreement"), made as of the 29th day of
February, 1996, between Koppers Industries, Inc., a Pennsylvania corporation
with its principal place of business at 436 Seventh Ave., Pittsburgh,
Pennsylvania (the "Company"), and Robert K. Wagner of Pittsburgh, Pennsylvania
(the "Consultant").
WHEREAS, the Consultant has been employed by and rendered services of
great value to the Company for more than 40 years;
WHEREAS, the Consultant has retired from the Company effective February
29, 1996;
WHEREAS, the Company desires to retain the benefit of the experience of
the Consultant;
WHEREAS, the Consultant is willing to provide services on the terms and
conditions set fort herein;
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Services. Company hereby retains Consultant for the purpose of
--------
performing consulting services as follows:
a. Director and Chairman of the Board of Directors. Consultant shall
-----------------------------------------------
serve as a Director and as Chairman of the Board of Directors of the Company
and, as Chairman, will be responsible for organizing board meetings and serving
as the Chairman at such meetings.
<PAGE>
b. Other Consulting Activities. Consultant shall provide general
---------------------------
consulting services to the Officers and management of the Company as requested,
including the following:
1. such services as may be required with respect to the Company's
relationship with The Broken Hill Proprietary Company Limited and Koppers
Australia Pty Ltd.;
2. act as the Company's Director of Koppers Australia Pty Ltd.;
3. such services as may be required with respect to the Company's
relationship with Cornerstone-Spectrum, Inc.; and
4. be responsible for the Company's community relations in
consultation with the Chief Executive Officer.
2. Term. This Agreement shall commence on March 1, 1996, and shall
----
continue for a period of one (1) year. Thereafter, the Agreement shall be
extended automatically for four (4) additional periods of one (1) year each,
unless either party notifies the other in writing not less than sixty (60) days
prior to the expiration of the initial one (1) year term of the Agreement or not
less than sixty (60) days prior to the expiration of the then current one (1)
year extension period of the intention to terminate the Agreement.
2
<PAGE>
3. Compensation
------------
3.1 Consulting Fee. During each year of the term of this Agreement
--------------
(which includes any renewal terms), Company will pay Consultant yearly
consulting fees, which fees may be increased at the discretion of the Board of
Directors, as follows:
a. $21,000 per year (or such other greater amount as may be established by
the Board of Directors) for Consultant's performance of his duties as a
Director of Company:
b. $20,000 per year (or such other greater amount as may be established by
the Board of Directors) for Consultant's performance of his duties as Chairman
of the Board of Company; and
c. $109,000 per year for Consultant's other activities.
3.2 Business Expenses. Consultant will be entitled to be reimbursed
-----------------
for ordinary and necessary business expenses incurred by Consultant in
connection with his performance of his duties, subject to Company's
reimbursement policies in effect from time to time.
4. Benefits. During the term of this Agreement (which includes any renewal
--------
terms) the Company will provide to Consultant;
a. membership in one (1) club of Consultant's choice located within the
city of Pittsburgh;
b. membership in one (1) country club of Consultant's choice;
c. health benefits of the Company as are provided to the executive
officers of the Company;
3
<PAGE>
d. an office in the City of Pittsburgh with appropriate secretarial
support;
e. one (1) parking space located conveniently to his office; and
f. financial planning, tax planning and tax and estate document
preparation services supplied by persons chosen by Consultant.
5. Non-Competition. In consideration of the Compensation paid to
---------------
Consultant under this Agreement, which Consultant acknowledges to be adequate,
Consultant covenants and agrees that during the term of this Agreement and for
the "Noncompetition Period" defined below, the Consultant shall not engage,
directly or indirectly, whether as principal or as agent, officer, director,
employee, consultant, shareholder, or otherwise, alone or in association with
another person, corporation or other entity, in any business which competes with
the business or businesses of the Company. Consultant further agrees that during
the term of this Agreement and during the Noncompetition Period, Consultant
shall not, directly or indirectly, solicit the trade of, or trade with, any
customer, prospective customer, supplier, or prospective supplier of Company for
any business purpose other than for the benefit of Company.
For purposes of this Agreement, "Noncompetition Period" is defined as two
(2) years following the termination of this Agreement.
4
<PAGE>
6. Independent Contractor Status. Consultant acknowledges and agrees that
-----------------------------
the Company is not hiring him as an employee, but as an independent contractor.
As such, Consultant will be solely responsible for all income, social security,
unemployment and other taxes payable in connection with his compensation
hereunder.
7. Arbitration. Any controversy or claim arising out of or relating to
-----------
this Agreement, or the breach thereof, shall be settled by arbitration before
one (1) arbitrator under the American Arbitration Association Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator may be
entered in any court of competent jurisdiction. Any arbitration shall be held in
Pittsburgh, Pennsylvania.
8. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
9. Amendment. This Agreement may be amended or modified only by a written
---------
instrument executed by both the Company and the Consultant.
10. Severability. The invalidity or unenforceability of any provision
------------
contained herein shall not effect the other provisions of this Agreement, and
such invalid or unenforceable provision shall be construed to be valid and
enforceable to the maximum extent permitted by law.
5
<PAGE>
11. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the Commonwealth of Pennsylvania.
12. Successors and Assigns. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, both parties and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.
ATTEST: KOPPERS INDUSTRIES, Inc.
/s/ R. D. Collins /s/ D. P. Traviss
By: ___________________________ By: _______________________________
/s/ R. D. Collins /s/ D. P. Traviss
Name: _________________________ Name: _____________________________
VP and Secretary President
Title: ________________________ Title: ____________________________
WITNESS: CONSULTANT
/s/ Rose Marie Helinski /s/ Robert K. Wagner
_______________________________ ___________________________________
6
<PAGE>
[LETTERHEAD OF DICKIE, McCAMEY & CHILCOTE]
October 14, 1997
Joseph E. Boan
Koppers Industries, Inc.
436 Seventh Avenue, Suite 1700
Pittsburgh, PA 15219
Dear Joe:
At our August 18, 1997 Board of Directors Meeting, the Board approved an
increase in Robert K. Wagner's Consulting Contract to $400,000 per year. This
contract includes director, chairman and consulting fees. Bob Wagner will also
participate in the 1997 Incentive Program on a pro rata basis with a target
participation level of 30%. The effective date of these changes is June 12,
1997.
If you have any questions about this matter please contact me.
Very truly yours,
/s/ Clayton A. Sweeney
Clayton A. Sweeney
<PAGE>
Exhibit 10.28
================================================================================
CREDIT AGREEMENT
dated as of November 24, 1997
by and among
KOPPERS INDUSTRIES, INC., as Borrower
THE PARTIES LISTED IN SCHEDULE 4.34 HERETO, as Guarantors
THE BANKS PARTIES HERETO FROM TIME TO TIME,
THE ISSUING BANK REFERRED TO HEREIN,
THE SWINGLINE BANK REFERRED TO HEREIN,
and
SBC WARBURG DILLON READ INC., as Arranger and Syndication Agent
and
SWISS BANK CORPORATION, STAMFORD BRANCH, as Documentation Agent
and
MELLON BANK, N.A., as Administrative Agent and Collateral Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Section Title Page
- ------- ----- ----
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions........................................... 2
1.02. Construction.................................................. 29
1.03. Accounting Principles......................................... 30
1.04. Currency Equivalents Generally................................ 32
ARTICLE II
THE FACILITY
2.01. The Commitments; Obligations Several.......................... 33
(a) The Commitments........................................ 33
(b) Obligations Several.................................... 33
2.02. Loans......................................................... 33
(a) (i) The Revolving Credit Commitments................. 33
(ii) Term Loan Commitments............................ 34
(b) Revolving Credit....................................... 35
2.03. Notes......................................................... 35
2.04. Making of Loans............................................... 35
2.05. Commitment Fees; Reduction of the Commitments; Mandatory
Prepayments of Loans.......................................... 36
(a) Commitment Fees 36
(b) Reduction of the Term Loan A Commitments and the
Revolving Credit Commitments.................................. 38
(c) Mandatory Prepayments.................................. 38
(i) Term Loan Facilities............................. 38
(ii) Revolving Facility............................... 40
2.06. Interest Rates................................................ 41
(a) Optional Bases of Borrowing............................ 41
(i) Base Rate Option................................. 41
(ii) Euro-Rate Option................................. 42
(iii) As-Offered Rate Option........................... 43
(b) Pricing Levels................................... 44
(c) Funding Periods.................................. 45
(d) Transactional Amounts............................ 45
(e) Interest After Maturity.......................... 45
(f) Euro-Rate Unascertainable; Impracticability...... 46
-i-
<PAGE>
Section Title Page
- ------- ----- ----
2.07. Conversion or Renewal of Interest Rate Options............. 47
(a) Conversion or Renewal............................ 47
(b) Failure to Convert or Renew...................... 48
2.08. Payments and Prepayments................................... 48
2.09. Interest Payment Dates..................................... 50
2.10. Pro Rata Treatment and Payments............................ 50
2.11. Additional Compensation in Certain Circumstances........... 51
(a) Increased Costs or Reduced Return Resulting from
Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc................................... 51
(b) Indemnity........................................ 53
2.12. Taxes...................................................... 53
(a) Payments Net of Taxes............................ 53
(b) Indemnity........................................ 54
2.13. Funding by Branch, Subsidiary or Affiliate................. 55
(a) Notional Funding................................. 55
(b) Actual Funding................................... 55
2.14. Currency Exchange Fluctuations............................. 56
ARTICLE III
THE SUBFACILITIES
3.01. Letters of Credit.......................................... 56
(a) Generally........................................ 56
(b) Australian Letters of Credit..................... 57
3.02. Letter of Credit Fees...................................... 58
(a) Commissions...................................... 58
(b) Facing Fee; Administration Fees.................. 59
3.03. Procedure for Issuance and Amendment of Letters of Credit.. 60
(a) Procedure for Issuance........................... 60
(b) Extension and Increase........................... 60
(c) Limitations on Issuance and Extension............ 61
(d) Amendments....................................... 62
3.04. Letter of Credit Participating Interests................... 62
3.05. Payments................................................... 63
(a) Reimbursement of Issuing Banks................... 63
(b) Agreement of Banks............................... 64
(c) Receipt of Payment............................... 64
(d) Rescission....................................... 64
(e) Equalization..................................... 65
3.06. Further Assurances......................................... 65
-ii-
<PAGE>
Section Title Page
- ------- ----- ----
3.07. Obligations Absolute....................................... 65
3.08. Certain Provisions Relating to the Issuing Banks; Additional
Provisions Regarding Letters of Credit.................... 66
(a) General.......................................... 66
(b) Administration................................... 66
(c) Indemnification of Issuing Bank.................. 67
3.09. Cash Collateral for Letters of Credit...................... 67
(a) Letter of Credit Collateral Account.............. 67
(b) Cash Collateral for Letter of Credit Exposure in
Certain Circumstances........................... 68
(c) Application of Funds............................. 68
(d) Survival of Provisions........................... 68
3.10. Certain Letters of Credit Outstanding as of Closing Date... 69
3.11. The Swingline Subfacility.................................. 69
(a) General.......................................... 69
(b) Nature of Credit................................. 69
(c) Swingline Note................................... 69
(d) Maturity......................................... 70
(e) Making of Swingline Loans, etc................... 70
(f) Repayment of Swingline Loans, etc................ 70
3.12. Limitations on the Making of Swingline Loans............... 70
(a) Swingline Current Availability................... 70
(b) Rights of the Parties............................ 71
3.13. Swingline Loan Participating Interests..................... 71
(a) Generally........................................ 71
(b) Obligations Absolute............................. 71
(c) Payment by Banks on Account of Swingline Loans... 72
(d) Distributions to Participants.................... 72
(e) Rescission....................................... 72
(f) Equalization..................................... 73
3.14. Certain Provisions Relating to the Swingline Bank.......... 73
(a) General.......................................... 73
(b) Administration................................... 73
(c) Indemnification of Swingline Bank................ 74
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.01. Organization and Qualification............................. 74
4.02. Authority and Authorization................................ 75
-iii-
<PAGE>
Section Title Page
- ------- ----- ----
4.03. Execution and Binding Effect............................... 75
4.04. Authorizations and Filings................................. 75
4.05. Absence of Conflicts....................................... 76
4.06. Financial Statements....................................... 76
4.07. No Event of Default; Compliance with Instruments........... 77
4.08. Litigation................................................. 78
4.09. Subsidiaries............................................... 78
4.10. Pension-Related Matters.................................... 78
4.11. Title to Property.......................................... 79
4.12. Contracts.................................................. 80
4.13. Taxes...................................................... 80
4.14. Financial Accounting Practices............................. 80
4.15. No Material Adverse Change................................. 81
4.16. Regulation U............................................... 81
4.17. Compliance with Laws....................................... 81
4.18. Patents, Licenses, Franchises.............................. 82
4.19. Accurate and Complete Disclosure........................... 82
4.20. Investment Company......................................... 83
4.21. Public Utility Holding Company............................. 83
4.22. Proceeds................................................... 83
4.23. Affiliated Entities........................................ 84
4.24. Regulation O............................................... 84
4.25. Burdensome Obligations..................................... 84
4.26. Insurance.................................................. 84
4.27. Delivery of the Senior Note Documents and Senior
Subordinated Note Documents............................... 85
4.28. Security Documents......................................... 85
4.29. Solvency................................................... 86
4.30. Hazardous Materials........................................ 86
4.31. Acquisition Agreement and Acquisition Agreement Guarantee.. 87
4.32. Existing Indebtedness...................................... 87
4.33. Employment Agreements...................................... 87
4.34. Guarantors................................................. 87
4.35. Transaction Documents...................................... 87
4.36. Senior Subordinated Notes.................................. 88
ARTICLE V
CONDITIONS PRECEDENT
5.01. Conditions to Initial Extensions of Credit................. 89
-iv-
<PAGE>
Section Title Page
- ------- ----- ----
5.02. Conditions to All Extensions of Credit..................... 96
(a) Notice........................................... 96
(b) Representations and Warranties................... 96
(c) No Default....................................... 96
(d) No Violations of Law............................. 96
5.03. Additional Conditions to Issuances of Letters of Credit.... 97
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01. Reporting and Information Requirements..................... 97
(a) Annual Audit Reports............................. 97
(b) Quarterly Reports................................ 98
(c) Management Reports............................... 98
(d) Compliance Certificates.......................... 99
(e) Accountants' Certificate......................... 99
(f) Forecast and Analysis............................ 99
(g) Other Reports and Information.................... 100
(h) Further Information.............................. 100
(i) Notice of Event of Default....................... 100
(j) Notice of Material Adverse Change................ 100
(k) Notice of Material Proceedings................... 101
(l) Notice of Pension-Related Events................. 101
(m) Notice of Other Material Defaults................ 102
(n) Notice of Other Amendments....................... 102
(o) Visitation....................................... 103
(p) Environmental Matters............................ 103
6.02. Preservation of Existence and Franchises................... 104
6.03. Insurance.................................................. 104
6.04. Maintenance of Properties.................................. 105
6.05. Payment of Taxes and Other Potential Charges and
Priority Claims; Payment of Other Current
Liabilities............................................... 105
6.06. Financial Accounting Practices............................. 106
6.07. Compliance with Laws....................................... 106
6.08. Use of Credits............................................. 107
6.09. Official Authorizations, etc............................... 107
6.10. Contracts.................................................. 107
6.11. Maintenance of Liens of the Security Documents............. 107
6.12. Environmental Matters...................................... 107
(a) Hazardous Substances............................. 107
-v-
<PAGE>
Section Title Page
- ------- ----- ----
(b) Financial Assurance.............................. 108
(c) Indemnification.................................. 108
6.13. Annual Bank Meeting........................................ 109
6.14. Additional Credit Parties.................................. 109
6.15. Certain Post-Closing Deliveries............................ 104
ARTICLE VII
NEGATIVE COVENANTS
7.01. Financial Maintenance Covenants............................ 110
(a) Net Worth........................................ 110
(b) Debt/Consolidated EBITDA......................... 110
(c) Interest Coverage Ratio.......................... 110
(d) Consolidated Debt Service Coverage Ratio......... 110
(e) Current Ratio.................................... 111
7.02. Liens...................................................... 111
7.03. Indebtedness............................................... 113
7.04. Guaranty Equivalents....................................... 114
7.05. Loans and Investments...................................... 115
7.06. Dividends and Related Distributions........................ 116
7.07. Limitation on Optional Payments and Modification of
Certain Debt Instruments................................... 118
7.08. Leases..................................................... 118
7.09. Fundamental Changes........................................ 119
7.10. Dispositions of Assets..................................... 119
7.11. Disposition of Stock in and Indebtedness of Subsidiaries... 121
7.12. Transactions with Affiliates............................... 121
7.13. Continuation of or Change in Business...................... 122
7.14. Capital Expenditures....................................... 122
7.15. Consolidated Tax Returns................................... 123
7.16. Regulation U............................................... 123
7.17. Certain Documents.......................................... 123
7.18. Compliance with ERISA...................................... 123
7.19. Limitation of Other Restrictions on Liens, Dividend
Restrictions on Subsidiaries, etc.......................... 124
7.20. Limitation on Other Restrictions on Amendment of
This Agreement, etc........................................ 124
7.21. Limitation on Creation of Subsidiaries..................... 125
7.22. Borrowings Under the Australian Revolving Loan Facility.... 125
-vi-
<PAGE>
Section Title Page
- ------- ----- ----
ARTICLE VIII
DEFAULTS
8.01. Events of Default.......................................... 126
8.02. Consequences of an Event of Default........................ 131
8.03. Set-Off.................................................... 132
8.04. Application of Proceeds.................................... 133
8.05. Equalization Among Bank Parties and Participants........... 134
ARTICLE IX
THE AGENTS
9.01. Appointment................................................ 135
9.02. Delegation of Duties....................................... 135
9.03. Nature of Duties; Independent Credit Investigation......... 135
9.04. Actions in Discretion of Agents; Instructions from Banks... 136
9.05. Exculpatory Provisions..................................... 137
9.06. Reimbursement and Indemnification.......................... 138
9.07. Administration by the Agents............................... 139
9.08. The Agents in Their Respective Individual Capacities....... 139
9.09. Holders of Notes........................................... 139
9.10. Successor Agents........................................... 140
9.11. Additional Agents.......................................... 141
9.12. Calculations............................................... 141
9.13. Administrative Agent's Fee................................. 136
9.14. Funding by Administrative Agent............................ 142
ARTICLE X
MISCELLANEOUS
10.01. Holidays................................................... 142
10.02. Records.................................................... 142
10.03. Amendments or Waivers...................................... 143
10.04. No Implied Waiver; Cumulative Remedies..................... 145
10.05. Notices.................................................... 145
10.06. Expenses; Taxes; Attorneys' Fees........................... 146
10.07. Limitation on Payments; Severability....................... 147
(a) Limitation on Payments........................... 147
-vii-
<PAGE>
Section Title Page
- ------- ----- ----
(b) Severability..................................... 147
10.08. Government Law; Submission to Jurisdiction; Waiver of
Jury Trial; Limitation of Liability....................... 148
(a) Governing Law.................................... 148
(b) Certain Waivers.................................. 148
(c) LIMITATION OF LIABILITY.......................... 149
10.09. Prior Understanding........................................ 149
10.10. Duration; Survival......................................... 149
10.11. Counterparts............................................... 150
10.12. Successors and Assigns; Participations; Assignments........ 150
(a) Successors and Assigns........................... 150
(b) Participations................................... 151
(c) Sales to Purchasing Banks........................ 151
(d) The Register..................................... 153
(e) Agreements of Transferor Bank and Purchasing
Bank............................................ 153
(f) Financial and Other Information.................. 154
(g) Taxes............................................ 154
(h) Assignments to Federal Reserve Bank.............. 155
10.13. Replacement of Bank........................................ 155
-viii-
<PAGE>
Annex A Committed Amounts
Exhibit A-1 Form of Revolving Credit Note..................... A-1-1
Exhibit A-2 Form of Term Loan A Note.......................... A-2-1
Exhibit A-3 Form of Term Loan B Note.......................... A-3-1
Exhibit B Form of Swingline Note............................ B-1
Exhibit C-1 Form of Subsidiary Guarantee...................... C-1-1
Exhibit C-2 Form of Australian Subsidiary Guarantee........... C-2-1
Exhibit D-1 Form of Security Agreement........................ D-1-1
Exhibit D-2 Form of Australian Security Trust Deed............ D-2-1
Exhibit D-3 Form of Securities Pledge Agreement............... D-3-1
Exhibit D-4 Form of Australian Fixed and Floating Charge...... D-4-1
Exhibit E-1 Form of Mortgage.................................. E-1-1
Exhibit E-2 Form of Australian Mortgage....................... E-2-1
Exhibit F Form of Commitment and Loan Transfer Supplement... F-1
Exhibit G-1 Form of Opinion of U.S. Counsel................... G-1-1
Exhibit G-2 Form of Opinion of Australian Counsel............. G-2-1
Exhibit G-3 Form of Opinion of Local Counsel.................. G-3-1
Exhibit G-4 Form of Opinion of Australian Local Counsel....... G-4-1
Exhibit H-1 Form of Australian Revolving Loan Facility........ H-1-1
Exhibit H-2 Form of Australian Term Loan Facility............. H-2-1
Exhibit I-1 Form of Australian Term Loan Letter of Credit..... I-1-1
Exhibit I-2 Form of Australian Revolving Loan Letter of Credit I-2-1
Schedule P1 Ownership
Schedule 1.01A Government Loans
Schedule 3.10 Certain Letters of Credit Outstanding as of Closing Date
Schedule 4.01 Organization and Qualification
Schedule 4.04 Authorizations and Filings
Schedule 4.05 Absence of Conflicts
Schedule 4.06 Financial Statements
Schedule 4.07 No Event of Default; Compliance with Instruments
Schedule 4.08 Litigation
Schedule 4.09 Subsidiaries
Schedule 4.10 Pension-Related Matters
Schedule 4.11 Title to Property
Schedule 4.12 Contracts
Schedule 4.13 Taxes
Schedule 4.17 Compliance with Laws
Schedule 4.18 Patents, Licenses, Franchises
Schedule 4.22 Sources and Uses of Funds Necessary to Consummate
the Transaction
Schedule 4.23 Affiliated Entities
Schedule 4.25 Burdensome Obligations
-ix-
<PAGE>
Schedule 4.26 Insurance
Schedule 4.28 Security Documents
Schedule 4.30 Hazardous Materials
Schedule 4.32 Existing Indebtedness
Schedule 4.33 Employment Agreements
Schedule 4.34 Guarantors
Schedule 5.01 (xvi) Legal Opinions of Local Counsel
Schedule 5.01 (xxxiv) Certain Documents to Be Delivered in Form and
Substance Satisfactory to the Agents
Schedule 7.01 Potential Write-Offs
Schedule 7.02 Liens
Schedule 7.03 Indebtedness
Schedule 7.04 Guaranty Equivalents
Schedule 7.05 Loans and Investments
Schedule 7.08 Leases
Schedule 7.12 Transactions with Affiliates
-x-
<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT, dated as of November 24, 1997, by and among
KOPPERS INDUSTRIES, INC., a Pennsylvania corporation (the "Borrower"), as
Borrower, THE PARTIES LISTED IN SCHEDULE 4.34 HERETO (each a "Guarantor" and
collectively, the "Guarantors"), as Guarantors, THE BANKS PARTIES HERETO FROM
TIME TO TIME (as hereinafter further defined, individually a "Bank" and
collectively, the "Banks"), THE ISSUING BANKS REFERRED TO HEREIN (as hereinafter
further defined, individually an "Issuing Bank" and collectively, the "Issuing
Banks"), THE SWINGLINE BANK REFERRED TO HEREIN (as hereinafter further defined,
the "Swingline Bank"), SBC WARBURG DILLON READ INC., as arranger and syndication
agent for the Banks (in such capacities, the "Arranger" and the "Syndication
Agent"), SWISS BANK CORPORATION, STAMFORD BRANCH, as documentation agent for the
Banks (the "Documentation Agent"), and MELLON BANK, N.A., as administrative
agent and collateral agent for the Banks, the Issuing Banks and the Swingline
Bank (in such capacities, the "Administrative Agent" and "Collateral Agent" and
together with the Arranger, Syndication Agent and the Documentation Agent, the
"Agents").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower, Saratoga Partners III, L.P. and Saratoga
Koppers Funding, Inc. (collectively, "Saratoga") have acquired all of the voting
and non-voting shares of common stock of the Borrower formerly owned by
Cornerstone Spectrum, Inc. for approximately $52.5 million in the aggregate (the
"Cornerstone Repurchase"); and
WHEREAS, the Borrower intends to enter into a transaction pursuant to
which (a) the Borrower will acquire from The Broken Hill Proprietary Company
Limited ("BHP") all of the shares of capital stock of Koppers Australia Pty.
Ltd. ("KAP") owned by BHP for approximately $65 million, (b) the Borrower will
repurchase from APT Holdings Corporation ("APT"), a wholly owned subsidiary of
Mellon Bank Corporation, all of the non-voting shares of common stock of the
Borrower owned by APT for approximately $23 million, of which the Borrower will
repurchase the portion of such shares having a purchase price of approximately
$11.5 million on the Closing Date (as hereinafter defined) (the "APT Transaction
Repurchase") and the Borrower will repurchase the remaining portion of such
shares on or prior to the date which is 364 days from the date hereof (the "APT
Post-Transaction Repurchase" and, together with the APT Transaction Repurchase,
the "APT Repurchase"), and (c) the Borrower will refinance certain of its
existing indebtedness, including all indebtedness under its senior credit
facilities and indebtedness represented by 8 1/2% Senior Notes due 2004 which
are tendered pursuant to a tender offer made by the Borrower. The transactions
described in clauses (a)-(c) above, excluding the APT Post-Transaction
Repurchase, together with the Cornerstone Repurchase, and the financings
therefor discussed below, are collectively referred to herein as the
"Transaction"; and
<PAGE>
-2-
WHEREAS, Saratoga has provided approximately $35.5 million in cash as
financing for the Cornerstone Repurchase (the "Equity Investments"); and
WHEREAS, not more than $5.5 million of proceeds from the various
financing components of the Transaction will be applied by the Borrower to
repurchase the shares of non-voting common stock acquired by Saratoga in the
Cornerstone Repurchase; and
WHEREAS, other than capital and credit which shall become available to
the Borrower upon satisfaction of the various conditions contained in this
Agreement, approximately $175 million in cash will be provided as financing for
the Transaction from the proceeds of the issuance of Senior Subordinated Notes
(as hereinafter defined); and
WHEREAS, upon consummation of the Transaction, ownership of the
capital stock of the Borrower shall be as set forth on Schedule P1 hereto; and
WHEREAS, subject to the terms and conditions of this Agreement, to
provide the remaining financing for the Transaction, to repay certain existing
Indebtedness of the Borrower and KAP, to pay fees and expenses in connection
with the Transaction and, after the Closing Date, to provide working capital to,
and for general corporate purposes of, the Borrower and KAP, the Banks have
agreed to make available on the Closing Date approximately $275 million from the
secured bank facilities provided for herein.
NOW THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I.
DEFINITIONS; CONSTRUCTION
-------------------------
1.01 Certain Definitions.
-------------------
In addition to other words and terms defined elsewhere in this
Agreement, as used herein the following words and terms shall have the following
meanings, respectively, unless the context otherwise clearly requires:
"Acquisition Agreement" shall mean the Asset Purchase Agreement dated
as of December 28, 1988 by and between the Borrower and Beazer East.
"Acquisition Agreement Guarantee" shall mean the Guarantee by Beazer
Limited of all Beazer East's liabilities and obligations under Article VII of
the Acquisition Agreement.
<PAGE>
-3-
"Additional Credit Party" and "Additional Credit Parties" shall have
the meanings assigned to those terms in Section 6.14.
"Administrative Agent" shall have the meaning assigned to that term
in the introductory paragraph hereto.
"Advisory Services Agreement" shall mean the Advisory Services
Agreement made as of the Closing Date by and between the Borrower and Saratoga
Partners III, L.P.
"Affected Party" shall have the meaning assigned to that term in
Section 2.06(f).
"Affiliate" of a person shall mean (a) any person which directly or
indirectly controls, or is controlled by, or is under common control with, such
person, any person which owns beneficially or of record 5% or more of any class
of capital stock of such person or a Subsidiary of such person or of which 5% or
more of any class of capital stock (or, in the case of a person that is not a
corporation, 5% or more of the equity interest) is owned beneficially or of
record by such person or a Subsidiary of such person, and (b) any director or
officer (or, in the case of a person which is not a corporation, any individual
having powers analogous to those of a corporate director or officer) of such
person or of a person who is an Affiliate of such person within the meaning of
the preceding clause (a), and (c) for each individual who is an Affiliate within
the meaning of the foregoing, any other individual related to such Affiliate by
consanguinity within the third degree or in a step or adoptive relationship
within such third degree or related by affinity with such Affiliate or any such
individual, and any person directly or indirectly controlled by any of the
foregoing. The term "control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of voting securities, by
contract or otherwise.
"Affiliated Entity" shall mean any person as to which the Borrower or
any of its Subsidiaries (i) is or has agreed or otherwise has a duty to become a
general partner of such person or otherwise generally liable for or on account
of the liabilities, acts or omissions of such person, (ii) has agreed or
otherwise has a duty to acquire securities or other interests in or make capital
contributions, loans or other investments to or on account of such person, or
(iii) has an interest in such person or has or may have a liability to or on
account of such person which would reasonably be expected to be material to the
business, operations, condition, financial or otherwise, or prospects of the
Borrower or the enterprise comprised of the Borrower and its Subsidiaries taken
as a whole, or an Affiliated Entity of any such person.
<PAGE>
-4-
"Agents" shall have the meaning assigned to that term in the
introductory paragraph hereto and "Agent" shall mean any of the individual
parties who are collectively referred to as Agents.
"Agreement" shall mean this Credit Agreement as amended, modified or
supplemented from time to time hereafter.
"Applicable Margin" shall have the meaning assigned to that term in
Section 2.06(a).
"APT" shall have the meaning assigned to that term in the recitals
hereto.
"APT Post-Transaction Repurchase" shall have the meaning assigned to
that term in the recitals hereto.
"APT Repurchase" shall have the meaning assigned to that term in the
recitals hereto.
"APT Transaction Repurchase" shall have the meaning assigned to that
term in the recitals hereto.
"Arranger" shall have the meaning assigned to that term in the
introductory paragraph hereto.
"As-Offered Rate" and "As-Offered Rate Option" shall have the meanings
assigned to those terms in Section 2.06(a) hereof.
"As-Offered Rate Portion" of any Loan or Loans shall mean at any time
the portion, including the whole, of such Loan or Loans bearing interest at such
time under the As-Offered Rate Option. If no Loan or Loans are specified, "As-
Offered Rate Portion" shall refer to the As-Offered Rate Portion of all Loans
outstanding at such time.
"As-Offered Rate Funding Period" shall have the meaning assigned to
that term in Section 2.06(c) hereof.
"Asset Disposition" shall have the meaning assigned to that term in
Section 7.10 hereof.
"Australian Credit Facilities" shall mean the Australian Revolving
Loan Facility and the Australian Term Loan Facility.
<PAGE>
-5-
"Australian Dollar," "Australian Dollars" and the symbol "A$" shall
mean lawful money of Australia.
"Australian Dollar Equivalent" shall have the meaning assigned to
that term in Section 1.04.
"Australian Fixed and Floating Charge" shall mean the executed
Australian Fixed and Floating Charge substantially in the form of Exhibit D-4,
as the same may be amended, modified or supplemented from time to time.
"Australian LC Issuing Bank" shall mean Swiss Bank Corporation, in its
capacity as issuer of the Australian Term Loan Letter of Credit and the
Australian Revolving Loan Letter of Credit.
"Australian Mortgage" or "Australian Mortgages" shall mean any or all,
as the case may be, of the mortgages or deeds of trust from each Australian
Subsidiary Guarantor to the Administrative Agent in substantially the form
attached as Exhibit E-2, with respect to the Australian Mortgaged Property, as
the same may be amended, modified or supplemented from time to time.
"Australian Mortgaged Property" shall mean and include any and all
property covered by or subject to or intended or purported to be subject to the
Liens of any of the Australian Mortgages.
"Australian Revolving Loan Facility" shall mean the revolving loan
facility between KAP and the Australian Revolving Loan Facing Bank substantially
in the form of Exhibit H-1 hereto.
"Australian Revolving Loan Facing Bank" shall mean Commonwealth Bank
of Australia in its capacity as the bank party to the Australian Revolving Loan
Facility, or any successor bank party thereto as may be appointed in accordance
with the terms thereof and hereof.
"Australian Revolving Loan Interest Reserve" shall mean at any time
2.5% of the aggregate Accommodations (as defined in the Australian Revolving
Loan Facility) provided to the Borrower under the Australian Revolving Loan
Facility.
"Australian Revolving Loan Letter of Credit" shall have the meaning
assigned to such term in Section 3.01(b)(ii).
<PAGE>
-6-
"Australian Security Trust Deed" shall mean the executed Australian
Security Trust Deed substantially in the form of Exhibit D-2, as the same may be
amended, modified or supplemented from time to time.
"Australian Subsidiary Guarantee" shall mean the executed Australian
Subsidiary Guarantee substantially in the form of Exhibit C-2, as the same may
be amended, modified or supplemented from time to time.
"Australian Subsidiary Guarantor" shall mean each person who executes
and delivers an Australian Subsidiary Guarantee.
"Australian Term Loan Facility" shall mean the term loan facility
between KAP and the Australian Term Loan Facing Bank substantially in the form
of Exhibit H-2 hereto.
"Australian Term Loan Facing Bank" shall mean National Australia Bank
Limited in its capacity as the bank party to the Australian Term Loan Facility,
or any successor bank party thereto as may be appointed in accordance with the
terms thereof and hereof.
"Australian Term Loan Interest Reserve" shall mean the difference
between the stated amount of the Australian Term Loan Letter of Credit and the
maximum Limit (as specified in the Australian Term Loan Facility) available to
KAP under the Australian Term Loan Facility.
"Australian Term Loan Letter of Credit" shall have the meaning
assigned to such term in Section 3.01(b)(i).
"Bank" shall mean any of the banks, institutional investors, insurance
companies and other lending institutions which shall be parties hereto from time
to time, and "Banks" shall mean all of the banks, institutional investors,
insurance companies and other lending institutions which shall be parties hereto
from time to time. "Bank" shall in any event include the Issuing Banks and the
Swingline Bank.
"Bank Parties" shall mean the Banks, the Issuing Banks, the
Swingline Bank and the Agents.
"Base Rate" and "Base Rate Option" shall have the meanings assigned
to those terms in Section 2.06(a).
<PAGE>
-7-
"Base Rate Portion" of any Loan or Loans shall mean at any time the
portion, including the whole, of such Loan or Loans bearing interest at such
time (i) under the Base Rate Option or (ii) in accordance with the first
sentence of Section 2.06(e). If no Loan or Loans are specified, "Base Rate
Portion" shall refer to the Base Rate Portion of all Loans outstanding at such
time.
"Beazer East" shall mean Beazer East, Inc., a Delaware corporation.
"Beazer Limited" shall mean Beazer Limited, an English corporation.
"BHP" shall have the meaning assigned to that term in the recitals
hereto.
"BHP Agreement" shall mean the Agreement for Sale of Shares by and
among BHP Nominees No. 3 Pty. Ltd., BHP, the Borrower, KAP, Continental Carbon
Australia Pty. Limited, and KAP Investments, Inc. dated as of October 8, 1997.
"Borrower" shall have the meaning assigned to that term in the
introductory paragraph hereto.
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the laws of the Commonwealth of Pennsylvania or the State
of New York or other day on which banking institutions are authorized or
obligated to close in Pittsburgh, Pennsylvania or New York, New York.
"Capitalized Lease" shall mean at any time any lease which is, or is
required to be, capitalized on the balance sheet of the lessee at such time, and
"Capitalized Lease Obligation" of any person at any time shall mean the
aggregate amount which is, or is required to be, reported as a liability on the
balance sheet of such person at such time as lessee under a Capitalized Lease.
"Closing Date" shall mean the date upon which Loans are initially made
hereunder, but in no event later than December 31, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, and regulations thereunder, in each
case as in effect from time to time. References to sections of the Code shall
be construed to also refer to any successor sections.
"Collateral" shall mean any property or assets at any time covered by
or subject to or intended or purported to be covered by or subject to the Lien
of any of the Security Documents.
<PAGE>
-8-
"Collateral Agent" shall have the meaning assigned to that term in
the recitals hereto.
"Commitment" shall mean, with respect to any Bank, the aggregate of
such Bank's Revolving Credit Commitment, Term Loan A Commitment and Term Loan B
Commitment.
"Commitment and Loan Transfer Supplement" shall mean a Commitment and
Loan Transfer Supplement substantially in the form of Exhibit F, executed and
delivered as provided in Section 10.12(c).
"Commitment Letter" shall mean the commitment letter dated October 31,
1997 from SBC Warburg Dillon Read Inc., Swiss Bank Corporation and Mellon Bank,
N.A. to the Borrower and the Fee Letters referred to therein.
"Committed Amount" and "Committed Amounts" shall have the meanings
assigned to those terms in Section 2.01(a).
"Computation Date" shall mean each March 31, June 30, September 30 and
December 31, the date upon which the Borrower shall request the making of any
Loan or the issuance of any Letter of Credit, and any other date upon which a
determination shall be made by the Administrative Agent to compute the U.S.
Dollar Equivalent of the aggregate Revolving Credit Exposure of the Banks for
the purposes of Section 2.14(b).
"Consolidated Current Assets" at any time shall mean the current
assets of the Borrower and its Consolidated Subsidiaries at such time, before
taking into account any LIFO Reserves.
"Consolidated Current Liabilities" at any time shall mean the current
liabilities of the Borrower and its Consolidated Subsidiaries at such time.
"Consolidated Current Ratio" at any time shall mean Consolidated
Current Assets at such time divided by the sum of (i) Consolidated Current
Liabilities at such time and (ii) the amount of all Revolving Credit Loans,
Letter of Credit Reimbursement Obligations and Swingline Loans outstanding at
such time to the extent that such amounts are not otherwise included within the
definition of Consolidated Current Liabilities at such time.
"Consolidated Debt Service Coverage Ratio" at the end of any fiscal
quarter shall mean Consolidated EBITDA for the four most recent consecutive full
fiscal quarters divided by the sum of (i) the amount of Consolidated Interest
Expense (which, through September 30, 1998, shall be calculated on a pro forma
---------
basis for the Transaction) during
<PAGE>
-9-
such fiscal quarters and (ii) the amount of scheduled retirements of long-term
Indebtedness due and paid in cash during such fiscal quarters. In making any
pro forma adjustment required pursuant to this definition, Indebtedness or other
obligations incurred in connection with the Transaction shall be deemed to bear
interest at a rate per annum not less than the one-month Euro-Rate as of the
last day of such period plus the Level V Applicable Margin specified in Section
2.06(a) in respect of all periods through the period ending March 31, 1998.
"Consolidated EBITDA" for any period shall mean the sum of (a)
Consolidated Net Income for such period, (b) Consolidated Interest Expense for
such period, (c) Consolidated Income Tax Expense for such period, (d)
consolidated depreciation expense of the Borrower and its Consolidated
Subsidiaries for such period, and (e) consolidated amortization expense of the
Borrower and its Consolidated Subsidiaries for such period, minus the sum of (x)
noncash gains to the extent included in determining such Consolidated Net Income
for such period and (y) equity earnings of Affiliates (other than Consolidated
Subsidiaries) to the extent included in determining Consolidated Net Income for
such period, plus the sum of (ww) cash dividends received from Affiliates by the
Borrower to the extent not included in determining Consolidated Net Income for
such period, (xx) noncash charges to the extent included in determining such
Consolidated Net Income for such period and in respect of which no future cash
expenditure is reasonably anticipated and (yy) equity losses of Affiliates
(other than Consolidated Subsidiaries) to the extent included in determining
Consolidated Net Income for such period; provided that through September 30,
1998, Consolidated EBITDA will be calculated on a pro forma basis for the
---------
Transaction; provided, further, that through September 30, 1998, Consolidated
EBITDA will be increased by the amount of cash write offs identified on Schedule
7.01, to the extent actually taken in the fiscal quarter ending December 31,
1997. In making any pro forma adjustment required pursuant to this definition,
Indebtedness or other obligations incurred in connection with the Transaction
shall be deemed to bear interest at a rate per annum not less than the one-month
Euro-Rate as of the last day of such period plus the Level V Applicable Margin
specified in Section 2.06(a) in respect of all periods through the period ending
March 31, 1998.
"Consolidated Income Tax Expense" for any period shall mean the
consolidated charges against income of the Borrower and its Consolidated
Subsidiaries for foreign, federal, state and local income taxes for such period.
"Consolidated Indebtedness" at any time shall mean the consolidated
Indebtedness of the Borrower and its Consolidated Subsidiaries at such time.
"Consolidated Interest Expense" for any period shall mean the
consolidated interest expense of the Borrower and its Consolidated Subsidiaries
for such period.
<PAGE>
-10-
"Consolidated Net Income" for any period shall mean the consolidated
net earnings (or loss) after taxes of the Borrower and its Consolidated
Subsidiaries for such period.
"Consolidated Net Worth" at any time shall mean the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries at such
time, except that there shall be deducted any amount of treasury stock reflected
as an asset at such time.
"Consolidated Subsidiaries" of a person at any time shall mean those
Subsidiaries whose accounts are or should be consolidated with those of such
person at such time, but excluding Unrestricted Subsidiaries.
"Controlled Group Member" shall mean each trade or business (whether
or not incorporated) which together with the Borrower or any of its Subsidiaries
is treated as a controlled group or single employer under Section 4001(a)(14) or
400(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of the Code.
"Cornerstone Repurchase" shall have the meaning assigned to that
term in the recitals hereto.
"Corresponding Source of Funds" shall mean, in the case of any Funding
Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts by a
Notional Euro-Rate Funding Office or by a Bank through a Notional Euro-Rate
Funding Office of one or more Dollar deposits in the interbank Eurodollar market
at the beginning of the Euro-Rate Funding Period corresponding to such Funding
Segment, having maturities approximately equal to such Euro-Rate Funding Period
and in an aggregate amount approximately equal to such Funding Segment.
"Credit Party" shall mean any of the Borrower or the Guarantors, and
"Credit Parties" shall mean all such persons, collectively.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement, among the Borrower or
any of its Subsidiaries, on the one hand, and one or more of the Agents, on the
other hand, designed to protect the Borrower or any of its Subsidiaries against
fluctuations in currency values.
"Documentation Agent" shall have the meaning assigned to that term
in the introductory paragraph hereto.
"Dollar," "Dollars" and the symbol "$" shall mean lawful money of
the United States of America.
<PAGE>
-11-
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed to also refer to any successor sections.
"Euro-Rate" and "Euro-Rate Option" shall have the meanings
assigned to those terms in Section 2.06(a).
"Euro-Rate Funding Period" shall have the meaning assigned to that
term in Section 2.06(c).
"Euro-Rate Portion" of any Loan or Loans shall mean at any time the
portion, including the whole, of such Loan or Loans bearing interest at any time
under the Euro-Rate Option or at a rate calculated by reference to the Euro-Rate
under Section 2.06(e)(i). If no Loan or Loans are specified, "Euro-Rate
Portion" shall refer to the Euro-Rate Portion of all Loans outstanding at such
time.
"Euro-Rate Reserve Percentage" shall have the meaning assigned to
that term in Section 2.06(a).
"Event of Default" shall mean any of the Events of Default
described in Section 8.01.
"Exchange Agreement" shall mean the Exchange Agreement, dated as of
December 1, 1997 between the Borrower and Saratoga Partners III, L.P.
"Existing Indebtedness" shall have the meaning assigned to that
term in Section 4.32.
"Federal Funds Effective Rate" shall have the meaning assigned to
that term in Section 2.06(a).
"Financing Proceeds" shall mean the cash (other than Net Cash
Proceeds) received by the Borrower and/or any of its Subsidiaries, directly or
indirectly, from any debt financing transaction of whatever kind or nature,
including without limitation from any incurrence of Indebtedness (other than the
sale of equity), any mortgage or pledge of an asset or interest therein
(including a transaction which is the substantial equivalent of a mortgage or
pledge), from a lease to a third party and a pledge of the lease payments due
thereunder to secure Indebtedness, from the refund of a cash deposit held by a
vendor of an asset other than in the ordinary course of business consistent with
past practice, or any other similar arrangement or technique whereby the
Borrower or any of its Subsidiaries obtains cash in
<PAGE>
-12-
respect of an asset, net of direct costs associated therewith. Financing
Proceeds shall not include any amounts with respect to the incurrence of
Indebtedness permitted by Section 7.03 hereof.
"Funding Segment," as applied to the Euro-Rate Portion or the As-
Offered Rate Portion at any time, shall mean the entire principal amount of such
Portion to which at the time in question there is applicable a particular Euro-
Rate Funding Period or As-Offered Rate Funding Period, as the case may be,
beginning on a particular day and ending on a particular day. (By definition,
each such Portion is at all times composed of an integral number of discrete
Funding Segments, and the sum of the principal amounts of all Funding Segments
of any such Portion at any time equals the principal amount of such Portion at
such time.)
"GAAP" shall mean, with respect to the Borrower and its Consolidated
Subsidiaries (including the Unrestricted Subsidiaries whose accounts are also
consolidated with the Borrower), generally accepted accounting principles in the
United States and, with respect to KAP and its consolidated Subsidiaries alone
(including Unrestricted Subsidiaries whose accounts are also consolidated with
KAP), generally accepted accounting principles in Australia, in any such case,
as such principles shall be in effect at the Relevant Date, subject to Section
1.03.
"Government Loan Liens" shall mean Liens securing Indebtedness
outstanding pursuant to the Government Loans existing on the Closing Date.
"Government Loans" shall mean the loans listed on Schedule 1.01A as
in effect on the date hereof.
"Guarantee" shall mean any Australian Subsidiary Guarantee or
Subsidiary Guarantee.
"Guarantor" and "Guarantors" shall have the meanings assigned to those
terms in the introductory paragraph hereto, and shall also include each person
who executes and delivers a Guarantee.
"Guaranty Equivalent": A person (the "Deemed Guarantor") shall be
deemed to be subject to a Guaranty Equivalent in respect of any obligation (the
"Assured Obligation") of another person (the "Deemed Obligor") if the Deemed
Guarantor directly or indirectly guarantees, becomes surety for, endorses,
assumes, indemnifies or agrees to indemnify the Deemed Obligor against, or
otherwise agrees, becomes or remains liable (contingently or otherwise) for,
such Assured Obligation, in whole or in part. Without limitation, a Guaranty
Equivalent shall be deemed to exist if a Deemed Guarantor agrees, becomes or
remains liable
<PAGE>
-13-
(contingently or otherwise), directly or indirectly: (i) to purchase or assume,
or to supply funds for the payment, purchase or satisfaction of, an Assured
Obligation, (ii) to make any loan, advance, capital contribution or other
investment in, or to purchase or lease any property or services from, a Deemed
Obligor (A) to maintain the solvency of the Deemed Obligor, (B) to enable the
Deemed Obligor to meet any other financial condition, (C) to enable the Deemed
Obligor to satisfy any Assured Obligation or to make any Stock Payment or any
other payment, or (D) to assure the holder of such Assured Obligation against
loss, (iii) to purchase or lease property or services from the Deemed Obligor
regardless of the non-delivery of or failure to furnish such property or
services, (iv) in a transaction having the characteristics of a take-or-pay or
throughput contract or as described in paragraph 6 of FASB Statement of
Financial Accounting Standards No. 47, or (v) in respect of any other
transaction the effect of which is to assure the payment or performance (or
payment of damages or other remedy in the event of nonpayment or nonperformance)
in whole or in part of any Assured Obligation.
"Hazardous Substances" shall mean hazardous wastes, hazardous
substances, hazardous materials, toxic substances, hazardous air pollutants or
toxic pollutants, as those terms are used in the Resource Conservation and
Recovery Act, 42 USC (S) 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, 42 USC (S) 9601 et seq., the Hazardous Materials
Transportation Act, 49 USC (S) 5101 et seq., the Toxic Substances Control Act,
15 USC (S) 2601 et seq., the Clean Air Act, 42 USC (S) 7401 et seq., and the
-- ---
Clean Water Act, 33 USC (S) 1251 et seq., or in any regulations promulgated
pursuant thereto, or in any other applicable state, federal or local Law.
"Hickson Credit Facility" shall mean the credit facilities provided by
Westpac Banking Corporation to Koppers Hickson and its Subsidiaries pursuant to
a letter agreement dated September 8, 1997, and any refinancings thereof on
terms substantially consistent with the terms thereof.
"Hickson Liens" shall mean Liens securing Indebtedness outstanding
from time to time pursuant to the Hickson Credit Facility existing on the
Closing Date.
"Indebtedness" of a person shall mean, without duplication:
(i) all indebtedness or liability for or on account of money
borrowed by, or credit extended to or on behalf of, or for or on account of
deposits with or advances to, such person; and all obligations of such
person evidenced by bonds, debentures, notes or similar instruments;
(ii) all indebtedness or liability for or on account of property
or services purchased or acquired by such person; and all amounts secured
by a Lien on property
<PAGE>
-14-
owned by such person (whether or not assumed) and Capitalized Lease
Obligations of such person (without regard to any limitation of the rights
and remedies of the holder of such Lien or the lessor under such
Capitalized Lease to repossession or sale of such property);
(iii) the face amount of all letters of credit (other than the
Australian Term Loan Letter of Credit and the Australian Revolving Loan
Letter of Credit) issued for the account of such person and, without
duplication, the unreimbursed amount of all drafts drawn thereunder, and
all other obligations of such person associated with such letters of credit
or draws thereunder; and obligations (in the nature of principal or
interest) of such person in respect of acceptances or similar obligations
issued or created for the account of such person;
(iv) the aggregate amount which is required to be reported as a
liability on the balance sheet of such person under a product financing or
similar arrangement pursuant to paragraph 8 of FASB Statement of Financial
Accounting Standards No. 49 or any similar requirement of GAAP; and
(v) all obligations of such person under any interest rate or
currency swap, cap, floor, collar, future, forward or option agreement, or
other interest rate or currency protection agreement (the "principal
amount" of which at any time shall be the amount then payable by such
person upon payment thereof due to default by such person);
provided that Indebtedness of a person shall exclude all obligations of such
person in respect of payment or performance bonds.
"Indebtedness for Borrowed Money" at any time shall mean, without
duplication:
(i) all indebtedness or liability for or on account of money
borrowed by, or credit extended to or on behalf of, or for or on account of
deposits with or advances to, such person; and all obligations of such
person evidenced by bonds, debentures, notes or similar instruments;
(ii) all amounts secured by a Lien on property owned by such
person (whether or not assumed) and Capitalized Lease Obligations of such
person (without regard to any limitation of the rights and remedies of the
holder of such Lien or the lessor under such Capitalized Lease to
repossession or sale of such property); and
<PAGE>
-15-
(iii) the unreimbursed amount of all drafts drawn under the letters
of credit issued for the account of such person and all other obligations
of such person associated with such letters of credit or draws thereunder;
and obligations (in the nature of principal or interest) of such person in
respect of acceptances or similar obligations issued or created for the
account of such person.
"Independent Financial Advisor" means a nationally recognized
investment banking, accounting or appraisal firm (i) which does not (and whose
directors, officers, employees and Affiliates do not) have a direct or indirect
material financial interest in the Borrower or any of its Subsidiaries and (ii)
which, in the sole judgment of the board of directors of the Borrower, is
otherwise independent and qualified to perform the task for which such firm is
being engaged.
"Interest Coverage Ratio" at the end of any fiscal quarter shall mean
Consolidated EBITDA during the four most recent consecutive full fiscal quarters
divided by the amount of Consolidated Interest Expense (which through September
30, 1998 shall be calculated on a pro forma basis for the Transaction) paid on
Indebtedness during such fiscal quarters.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future, interest rate option, interest rate swap,
interest rate cap or other interest rate hedge arrangement, among the Borrower
or any of its Subsidiaries, on the one hand, and one or more of the Agents, on
the other hand, to or under which the Borrower or any of its Subsidiaries is a
party or a beneficiary on the Closing Date or becomes a party or a beneficiary
thereafter.
"Investors" shall mean Saratoga and the Management Investors.
"Issuing Banks" shall mean the Australian LC Issuing Bank and the
Standby and Trade LC Issuing Bank, in their capacities as issuers of Letters of
Credit.
"KAP" shall have the meaning assigned to that term in the recitals
hereto.
"Koppers Hickson" shall mean Koppers-Hickson Investments Pty.
Limited.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"Letter of Credit" shall have the meaning assigned to that term in
Section 3.01, and "Letters of Credit" shall mean all such letters of credit
collectively.
<PAGE>
-16-
"Letter of Credit Application" shall have the meaning assigned to
that term in Section 3.03(a).
"Letter of Credit Collateral Account" shall have the meaning
assigned to that term in Section 3.09(a).
"Letter of Credit Exposure" at any time shall mean the sum of (i) the
aggregate Letter of Credit Unreimbursed Draws at such time and (ii) the
aggregate Letter of Credit Undrawn Availability at such time.
"Letter of Credit Participating Interest" shall have the meaning
assigned to that term in Section 3.04.
"Letter of Credit Reimbursement Obligation" shall mean the obligation
of the Borrower to reimburse an Issuing Bank the U.S. Dollar Equivalent amount
of each drawing under a Letter of Credit issued by such Issuing Bank, together
with interest thereon as provided herein.
"Letter of Credit Undrawn Availability" with respect to any Letter of
Credit at any time shall mean the maximum U.S. Dollar Equivalent amount
available to be drawn under such Letter of Credit at such time and thereafter,
regardless of the existence or satisfaction of any condition or any limitation
on drawing.
"Letter of Credit Unreimbursed Draw" with respect to any Letter of
Credit at any time shall mean the aggregate U.S. Dollar Equivalent amount of all
payments made by the Issuing Bank issuing such Letter of Credit under such
Letter of Credit, to the extent not repaid by the Borrower at such time.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including any conditional sale or title retention arrangements, and
any assignment, deposit arrangement or lease intended as, or having the effect
of, security.
"LIFO Reserve" shall mean any reserve required under the last-in-
first-out method of accounting.
"Loan" shall mean any loan made by a Bank to the Borrower under this
Agreement, and "Loans" shall mean all loans made by the Banks under this
Agreement, including Term Loans, Revolving Credit Loans and Swingline Loans.
<PAGE>
-17-
"London Business Day" shall mean a day for dealing in deposits in
Dollars by and among banks in the London interbank market and which is a
Business Day.
"Management Investors" shall mean those persons who are or who
hereafter may become Management Investors as provided in the Stockholder's
Agreement.
"Management Stock Repurchase" shall have the meaning assigned to
that term in Section 4.22.
"Managing Directors' Reports" shall mean reports containing unaudited
consolidated and consolidating statements of income prepared by KAP on a basis
consistent with past practices for presentation to the Managing Directors of
KAP.
"Material Adverse Effect" shall mean: (i) a material adverse effect
on the business, operations, condition (financial or otherwise) or prospects of
the Borrower or the enterprise comprised of the Borrower and its Subsidiaries
taken as a whole, (ii) a material adverse effect on the ability of the Borrower
or any Guarantor to perform or comply with any of the terms and conditions of
the Senior Note Documents, the Senior Subordinated Note Documents, this
Agreement or any Related Document to which it is a party, or (iii) an adverse
effect on the legality, validity, binding effect, enforceability or
admissibility into evidence of this Agreement or any Related Document, or the
ability of the Administrative Agent, Collateral Agent or any Bank Party to
enforce any rights or remedies under or in connection with this Agreement or any
Related Document.
"Monessen Facility" shall mean the Company's coke facility located
in Monessen, Pennsylvania.
"Monessen Section 29 Tax Credits" means the tax credits available
under Section 29 of the U.S. Internal Revenue Code associated with the
operations of the Monessen Facility.
"month," with respect to a Euro-Rate Funding Period, shall mean the
interval between the Euro-Convention Dates in consecutive calendar months as to
such Euro-Rate Funding Period. The "Euro-Convention Date" in a calendar month
at the end of any Euro-Rate Funding Period shall mean the day in such calendar
month numerically corresponding to the first day of such Euro-Rate Funding
Period, except (i) if there is no such numerically corresponding day in a
calendar month, the "Euro-Convention Date" for such calendar month shall mean
the last London Business Day of such calendar month, (ii) if the first day of
such Euro-Rate Funding Period is the last day of a calendar month, the "Euro-
Convention Date" for any later calendar month shall mean the last London
Business Day of such calendar month and (iii) otherwise, if a numerically
corresponding day in a given calendar month is
<PAGE>
-18-
not a London Business Day, the "Euro-Convention Date" for such calendar month
shall mean the next following day that is a London Business Day of such calendar
month.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" or "Mortgages" shall mean any or all, as the case may be,
of the mortgages or deeds of trust from the Borrower to the Administrative Agent
in substantially the form attached as Exhibit E-1, with respect to the Mortgaged
Property, as the same may be amended, modified or supplemented from time to
time.
"Mortgaged Property" shall mean and include any and all property
covered by or subject to or intended or purported to be subject to the Liens of
any of the Mortgages.
"Multiemployer Plan" shall mean any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Borrower, any of its Subsidiaries or any other Controlled Group Member
has or had an obligation to contribute.
"Net Cash Proceeds" from any asset disposition shall mean the gross
cash proceeds (including casualty insurance proceeds) of such disposition, net
of all reasonable legal, accounting and financial advisory fees and expenses,
brokerage commissions and other similar fees and expenses incurred in connection
with, and provision for all taxes resulting from, such disposition and any
reasonable reserve established in accordance with GAAP against any liabilities
associated with the assets disposed of and retained by the seller provided that
the amount of any subsequent reduction of such reserve (other than in connection
with a payment in respect of such liability) shall be deemed to be Net Cash
Proceeds on the date of such reduction.
"Net Financing Proceeds" shall mean Financing Proceeds, net of all
reasonable legal, accounting and financial advisory fees and expenses, brokerage
commissions and other similar fees and expenses incurred in connection with, and
provision for all taxes resulting from, such financing.
"New Stockholders' Agreement" shall mean the New Stockholders'
Agreement, to be entered into upon consummation of the APT Post-Transaction
Repurchase, by and among the Borrower and the Investors, in form and substance
satisfactory to the Agents.
"Note" or "Notes" shall mean the Term Loan A Note(s), the Term Loan B
Note(s), Revolving Credit Note(s) or Swingline Note(s), as the case may be, of
the Borrower, executed and delivered under this Agreement, together with all
extensions, renewals, refinancings or refundings thereof in whole or in part.
<PAGE>
-19-
"Notional Euro-Rate Funding Office" shall have the meaning assigned
to that term in Section 2.13(a).
"Obligations" shall mean all obligations from time to time of the
Borrower to any Bank Party arising under or in connection with or related to or
evidenced by or secured by this Agreement or any Related Document, and all
extensions, renewals or refinancings thereof, whether such obligations are
direct or indirect, otherwise secured or unsecured, joint or several, absolute
or contingent, due or to become due, whether for payment or performance, now
existing or hereafter arising (and specifically including obligations arising or
accruing after the commencement of any bankruptcy, insolvency or similar
proceedings with respect to the Borrower or which would have arisen or accrued
but for the commencement of such proceeding, even if the claim for such
obligation is not allowed in such proceeding under applicable Law). Without
limitation of the foregoing, such obligations include the principal amount of
all Loans, interest and Letter of Credit Reimbursement Obligations and fees,
indemnities or expenses under or in connection with this Agreement or any
Related Document, and all extensions, renewals and refinancings thereof, whether
or not such Loans were made or Letters of Credit were issued in compliance with
the terms and conditions of this Agreement or in excess of the obligation of the
Banks to lend or the authority of the Issuing Banks to issue Letters of Credit.
Obligations shall remain notwithstanding any assignment or transfer or any
subsequent assignment or transfer of any of the Obligations or any interest
therein.
"Office," when used in connection with the Administrative Agent or
Collateral Agent, shall mean its office located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258-0001, when used in connection with the Arranger
and Syndication Agent, shall mean its office located at 677 Washington
Boulevard, Stamford, Connecticut 06912 and when used in connection with the
Documentation Agent, shall mean its office located at 677 Washington Boulevard,
Stamford, Connecticut 06912, or in each case such other office or offices of
such Agents, or any branches, subsidiaries or affiliates thereof, as may be
designated from time to time by any respective Agent.
"Official Authorizations" shall have the meaning assigned to that
term in Section 4.04.
"Official Body" shall mean any government or political subdivision, or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Option" shall mean the Base Rate Option, the Euro-Rate Option or
the As-Offered Rate Option, as the case may be.
<PAGE>
-20-
"Participants" shall have the meaning assigned to that term in
Section 10.12(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under Title IV of ERISA, or any other governmental agency, department or
instrumentality succeeding to the functions of said corporation.
"Performance Ratio" at any time shall mean (x) the sum of Consolidated
Indebtedness at such time plus, through September 30, 1998, the amount of cash
write offs identified on Schedule 7.01, to the extent actually taken in the
fiscal quarter ending December 31, 1997, but only until such time as and to the
extent that such write offs are actually paid, divided by (y) Consolidated
EBITDA for the four most recent consecutive full fiscal quarters at such time.
"Permitted Asset Disposition Proceeds Reinvestments" shall mean
capital assets useful in the business of the Borrower; provided that in no event
shall the fair market value of the aggregate amount of Permitted Asset
Disposition Proceeds Reinvestments exceed $10,000,000.
"Permitted Indebtedness" shall have the meaning assigned to that
term in Section 7.03.
"Permitted Liens" shall have the meaning assigned to that term in
Section 7.02.
"person" shall mean any individual, corporation, partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), governmental authority or agency, or any
other entity.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) to which Section 4021 of ERISA applies and (i) which is
maintained for employees of the Borrower or any Controlled Group Member, or (ii)
to which the Borrower or any Controlled Group Member made, or was required to
make, contributions at any time within the preceding five (5) years.
"Portion" shall mean the Base Rate Portion, the Euro-Rate Portion or
As-Offered Rate Portion.
"Potential Default" shall mean any event or condition which with
notice, passage of time or a determination by the Administrative Agent or the
Banks, as the case may be, or any combination of the foregoing, would constitute
an Event of Default.
<PAGE>
-21-
"Pricing Level" shall have the meaning assigned to that term in
Section 2.06(b).
"Prime Rate" shall have the meaning assigned to that term in Section
2.06(a).
"Pro Rata" shall mean from or to each Bank in proportion to such
Bank's applicable Proportion.
"Proportion" shall mean the Term Loan A Proportion, Term Loan B
Proportion or Revolving Credit Proportion, as the case may be.
"Purchasing Banks" shall have the meaning assigned to that term in
Section 10.12(c).
"Register" shall have the meaning assigned to that term in Section
10.12(d).
"Related Documents" shall mean the Commitment Letter (to the extent
that the obligations thereunder survive the execution and delivery of this
Agreement), the Notes, the Security Documents, the Letter of Credit
Applications, the Letters of Credit, the Commitment and Loan Transfer
Supplements, the Australian Credit Facilities and any and all other instruments
or documents delivered by or on behalf of the Borrower in connection with any
thereof, as the same may be amended, modified or supplemented from time to time.
"Relevant Date" shall mean the time a relevant computation or
determination is to be made or the date of relevant financial statements.
"Reportable Event" shall mean (i) a reportable event described in
Section 4043 of ERISA and regulations thereunder, (ii) a withdrawal by a
substantial employer from a Plan to which more than one employer contributes, as
referred to in Section 4063(b) of ERISA, (iii) a cessation of operations at a
facility causing more than twenty percent (20%) of Plan participants to be
separated from employment, as referred to in Section 4062(e) of ERISA, or (iv) a
failure to make a required installment or other payment with respect to a Plan
when due in accordance with Section 412 of the Code or Section 302 of ERISA
which causes the total unpaid balance of missed installments and payments
(including unpaid interest) to exceed $750,000.
"Required Banks" shall mean, as of any date, Banks which have made
Loans or have Letter of Credit Exposure constituting, in the aggregate, at least
65% in principal amount of all Loans and Letter of Credit Exposure outstanding
on such date, or, if no Loans or Letter of Credit Exposure is outstanding on
such date, Banks which have Commitments constituting, in the aggregate, at least
65% of all Commitments outstanding on such date.
<PAGE>
-22-
"Retiring Employee Stock Repurchases" shall mean the repurchase of
shares of common stock of the Borrower and/or options to purchase shares of
common stock of the Borrower from an employee of the Borrower upon the
retirement of such employee in accordance with the terms of the Stockholders'
Agreement or the New Stockholders' Agreement.
"Revolving Credit Commitment" shall have the meaning assigned to
that term in Section 2.02(a).
"Revolving Credit Committed Amount" shall have the meaning assigned
to that term in Section 2.01(a).
"Revolving Credit Expiration Date" shall mean the sixth anniversary
of the Closing Date.
"Revolving Credit Exposure" of any Bank at any time shall mean the sum
of such Bank's Pro Rata share of the aggregate principal amount of Revolving
Credit Loans, the aggregate Letter of Credit Exposure and the aggregate
principal amount of Swingline Loans outstanding at such time.
"Revolving Credit Facility" shall mean the credit facility evidenced
by the Revolving Credit Committed Amount.
"Revolving Credit Loans" shall have the meaning assigned to that
term in Section 2.02(a).
"Revolving Credit Notes" shall mean the promissory notes of the
Borrower executed and delivered under Section 2.03, any promissory note issued
in substitution therefor pursuant to Section 2.13(b) or 10.12(c), together with
all extensions, renewals, refinancings or refundings thereof in whole or part.
"Revolving Credit Proportion" shall have the meaning assigned to
that term in Section 2.01(a).
"S&P" shall mean Standard & Poor's Corporation.
"Saratoga" shall have the meaning assigned to that term in the
recitals hereto.
"Scheduled Amortization Payment" shall mean principal payments applied
to the Term Loan A Facility, the Australian Term Loan Facility and the Term Loan
B Facility on the last Business Day of the month set forth in the column under
the heading "Date"
<PAGE>
-23-
below, and in the amounts set forth in the appropriate subcolumn under the
heading "Scheduled Amortization Payment" below:
<TABLE>
<CAPTION>
Scheduled Amortization Payment
======================================================================
Date Australian Term
Term Loan A Loan Term Loan B
Facility Facility Facility
<S> <C> <C> <C>
May 31, 1998 $4,000,000 $1,000,000 $ 500,000
November 30, 1998 4,000,000 1,000,000 500,000
May 31, 1999 5,500,000 2,000,000 500,000
November 30, 1999 5,500,000 2,000,000 500,000
May 31, 2000 7,000,000 3,000,000 500,000
November 30, 2000 7,000,000 3,000,000 500,000
May 31, 2001 6,000,000 4,000,000 500,000
November 30, 2001 6,000,000 4,000,000 500,000
May 31, 2002 5,000,000 5,000,000 500,000
November 30, 2002 5,000,000 5,000,000 500,000
May 31, 2003 7,500,000 5,000,000 10,000,000
November 30, 2003 7,500,000 5,000,000 10,000,000
May 31, 2004 20,000,000
November 30, 2004 20,000,000
=====================================================================
</TABLE>
provided that each Scheduled Amortization Payment in respect of the Term Loan A
Facility commencing on and after May 31, 1999 shall be reduced by one tenth of
the amount of the aggregate undrawn Term Loan A Committed Amounts of the Banks
at the time of the Term Loan A Commitment Expiration Date, provided, further,
that each Scheduled Amortization Payment in respect of the Australian Term Loan
Facility shall be net of any reduction in the Australian Term Loan Interest
Reserve attributable to such Scheduled Amortization Payment as provided in
Section 2.05(c)(i)(E).
"Securities Pledge Agreement" shall mean the executed Securities
Pledge Agreement substantially in the form of Exhibit D-3, as the same may be
amended, modified or supplemented from time to time.
"Security Agreement" shall mean the executed Security Agreement
substantially in the form of Exhibit D-1, as the same may be amended, modified
or supplemented from time to time.
<PAGE>
-24-
"Security Documents" shall mean collectively the Subsidiary
Guarantees, the Australian Subsidiary Guarantee, the Mortgages, the Australian
Mortgages, the Securities Pledge Agreement, the Australian Fixed and Floating
Charge, the Security Agreement and the Australian Security Trust Deed and any
other agreement or instrument from time to time granting or purporting to grant
the Collateral Agent a Lien on any property for the benefit of the Bank Parties
to secure the Obligations, or constituting a Guaranty Equivalent for the
Obligations, or subordinating obligations to the Obligations, and any and all
instruments and documents relating to any or all thereof; provided that the
Senior Subordinated Note Documents shall not be deemed to be Security Documents.
"Senior Note Documents" shall mean the Senior Notes, the Senior Note
Indenture, the Senior Note Underwriting Agreement and the Senior Note
Prospectus, and all other agreements, documents and instruments relating
thereto, each as constituted on the date hereof and as the same may be amended,
modified or supplemented in accordance with this Agreement.
"Senior Note Indenture" shall mean the Indenture, dated as of February
10, 1994, between the Borrower and PNC Bank, National Association (as successor
to Integra Trust Company), trustee, relating to the Senior Notes, as amended by
the First Amendment to Indenture, dated as of September 1, 1996, between the
Borrower and PNC Bank, National Association and as further amended by the Second
Amendment to Indenture, dated as of November 19, 1997, between the Borrower and
PNC Bank, National Association, as the same may be further amended, modified or
supplemented in accordance with this Agreement.
"Senior Note Prospectus" shall mean the Prospectus, dated February
3, 1994, relating to the Senior Notes.
"Senior Note Underwriting Agreement" shall mean the Underwriting
Agreement, dated February 3, 1994, between the Borrower and Smith Barney
Shearson Inc.
"Senior Notes" shall mean the Borrower's 8-1/2% Senior Notes Due 2004,
issued pursuant to the Senior Note Indenture, as the same may be amended,
modified or supplemented in accordance with this Agreement to the extent such
Senior Notes remain outstanding upon consummation of the Transaction.
"Senior Subordinated Note Documents" shall mean the Senior
Subordinated Notes, the Senior Subordinated Note Indenture, the Senior
Subordinated Note Purchase Agreement, the Senior Subordinated Note Registration
Rights Agreement and the Senior Subordinated Note Offering Memorandum, and all
other agreements, documents and instruments relating thereto, each as
constituted on the date hereof and as the same may be amended, modified or
supplemented in accordance with this Agreement.
<PAGE>
-25-
"Senior Subordinated Note Indenture" shall mean the Indenture, dated
as of December 1, 1997, between the Borrower and PNC Bank, National Association,
as trustee, relating to the Senior Subordinated Notes, as the same may be
amended, modified or supplemented in accordance with this Agreement.
"Senior Subordinated Note Offering Memorandum" shall mean the Offering
Memorandum, dated November 20, 1997, relating to the Senior Subordinated Notes.
"Senior Subordinated Note Purchase Agreement" shall mean the Purchase
Agreement, dated December 1, 1997, between the Borrower and SBC Warburg Dillon
Read Inc.
"Senior Subordinated Note Registration Rights Agreement" shall mean
the Registration Rights Agreement, dated December 1, 1997, between the Borrower
and SBC Warburg Dillon Read Inc.
"Senior Subordinated Notes" shall mean the Borrower's 9-7/8% Senior
Subordinated Notes Due 2007, issued pursuant to the Senior Subordinated Note
Indenture, as the same may be amended, modified or supplemented in accordance
with this Agreement.
"Significant Subsidiary" shall have the meaning assigned to the term
"significant subsidiary" pursuant to Section 1-02 of Regulation S-X promulgated
under the United States Securities Act of 1933, as amended.
"Site Reviewers" shall mean such persons as the Collateral Agent may
designate pursuant to Section 6.01(p).
"Spot Rate" shall mean with respect to any applicable currency, at any
date of determination thereof, the spot rate of exchange for such date in London
that appears on the display page applicable to such currency on the Telerate
System Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the spot rate of exchange in London);
provided that if there shall at any time no longer exist such a page or a
relevant spot rate is not shown on such service, the spot rate of exchange shall
be determined by reference to another similar rate publishing service selected
by the Administrative Agent and if no such similar rate publishing service is
available by reference to the published rate of the Administrative Agent in
effect at such date for similar commercial transactions.
"Standard Notice" shall mean an irrevocable notice provided to the
Administrative Agent:
<PAGE>
-26-
(i) no later than 11:00 a.m., Pittsburgh time, on any Business Day
in the case of selection of, conversion to, or renewal of, the Base Rate
Option or prepayment of any Base Rate Portion;
(ii) no later than 11:00 a.m., Pittsburgh time, on any Business
Day which is at least three (3) London Business Days in advance in the case
of selection of, conversion to, or renewal of, the Euro-Rate Option or
prepayment of any Euro-Rate Portion; and
(iii) no later than 1:00 p.m., Pittsburgh time, the same
Business Day in the case of selection of, or conversion to, or renewal of,
the As-Offered Rate Option or prepayment of any As-Offered Rate Portion.
"Standby and Trade LC Issuing Bank" shall mean Mellon Bank, N.A., or
any other successor Bank which may be designated as the successor Standby and
Trade LC Issuing Bank by the Standby and Trade LC Issuing Bank from time to time
which following any such designation shall mean such successor, in any such case
in such Standby and Trade LC Issuing Bank's capacity as issuer of Standby or
Trade Letters of Credit.
"Standby or Trade Letters of Credit" shall have the meaning assigned
to that term in Section 3.01(a).
"Stock Payment" by any person shall mean any dividend, distribution or
payment of any nature (whether in cash, securities, or other property) on
account of or in respect of any shares of the capital stock (or warrants,
options or rights therefor) of such person, including any payment on account of
the purchase, redemption, retirement, defeasance or acquisition of any shares of
the capital stock (or warrants, options or rights therefor) of such person, in
each case regardless of whether required by the terms of such capital stock (or
warrants, options or rights) or any other agreement or instrument.
"Stockholders' Agreement" shall mean the Stockholders' Agreement,
dated as of December 28, 1988, by and among the Borrower and the Stockholders
referred to therein, as amended.
"Subsidiary" of a person at any time shall mean any corporation of
which a majority (by number of shares or number of votes) of any class of
outstanding capital stock normally entitled to vote for the election of one or
more directors (regardless of any contingency which does or may suspend or
dilute the voting rights of such class) is at such time owned directly or
indirectly, beneficially or of record, by such person or one more Subsidiaries
of such person, and any trust or other person of which a majority of any class
of
<PAGE>
-27-
outstanding equity interests is at such time owned directly or indirectly,
beneficially or of record, by such person or one or more Subsidiaries of such
person.
"Subsidiary Guarantee" shall mean any executed Subsidiary Guarantee
substantially in the form of Exhibit C-1, as the same may be amended, modified
or supplemented from time to time.
"Subsidiary Guarantor" shall mean each person who executes and
delivers a Subsidiary Guarantee.
"Swingline Bank" shall mean Mellon Bank, N.A., or any other successor
Bank which may be designated as the successor Swingline Bank by the Swingline
Bank from time to time which following any such designation shall mean such
successor, in any such case in such Swingline Bank's capacity as the Swingline
Bank.
"Swingline Current Availability" shall have the meaning assigned to
that term in Section 3.12(a) hereof.
"Swingline Loan Participating Interest" shall have the meaning
assigned to that term in Section 3.13(a) hereof.
"Swingline Loans" shall have the meaning assigned to that term in
Section 3.11(a) hereof.
"Swingline Note" shall mean the promissory note of the Borrower
executed and delivered under Section 3.11(c) hereof, together with all
extensions, renewals, refinancings or refundings thereof in whole or in part.
"Swingline Subfacility Amount" shall have the meaning assigned to
that term in Section 3.11(a) hereof.
"Syndication Agent" shall have the meaning assigned to that term in
the introductory paragraph hereto.
"Term Loan" shall mean any Term Loan A Facility Term Loan or any
Term Loan B Facility Term Loan, as the case may be.
"Term Loan A Commitment" shall have the meaning assigned to that
term in Section 2.02(a)(ii)(A).
<PAGE>
-28-
"Term Loan A Commitment Expiration Date" shall mean November 22, 1998,
or such earlier date as the Term Loan Commitments shall terminate pursuant to
this Agreement.
"Term Loan A Committed Amount" shall have the meaning assigned to
that term in Section 2.01(a)(ii).
"Term Loan A Expiration Date" shall mean the sixth anniversary of
the Closing Date.
"Term Loan A Facility" shall mean the credit facility evidenced by
the Term Loan A Committed Amount of each Bank.
"Term Loan A Facility Term Loan" shall have the meaning assigned to
that term in Section 2.02(a)(ii)(A).
"Term Loan A Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03, or any promissory note issued in
substitution therefor pursuant to Section 10.12(c), together with all
extensions, renewals, refinancings or refundings thereof in whole or in part.
"Term Loan A Proportion" shall have the meaning assigned to that
term in Section 2.01(a).
"Term Loan B Commitment" shall have the meaning assigned to that
term in Section 2.02(a)(ii)(B).
"Term Loan B Committed Amount" shall have the meaning assigned to
that term in Section 2.01(a).
"Term Loan B Expiration Date" shall mean the seventh anniversary of
the Closing Date.
"Term Loan B Facility" shall mean the credit facility evidenced by
the Term Loan B Committed Amount of each Bank.
"Term Loan B Facility Term Loan" shall have the meaning assigned to
that term in Section 2.02(a)(ii)(B).
"Term Loan B Notes" shall mean the promissory notes of the Borrower
executed and delivered under Section 2.03, or any promissory note issued in
substitution
<PAGE>
-29-
therefor pursuant to Section 10.12(c), together with all extensions, renewals,
refinancings or refundings thereof in whole or in part.
"Term Loan B Proportion" shall have the meaning assigned to that
term in Section 2.01(a).
"Transaction" shall have the meaning assigned to that term in the
recitals hereto.
"Transaction Documents" shall mean the Securities Purchase Agreement,
dated as of October 15, 1997 among Koppers Industries, Inc., Saratoga Partners
III, L.P., Saratoga Koppers Funding, Inc., Pittsburgh Acquisition Corporation
and the Borrower, the BHP Agreement, the Share Purchase Agreement by and among
the Borrower and APT Holdings Corporation dated as of December 1, 1997, the
Exchange Agreement and the Senior Subordinated Note Documents.
"Transfer Effective Date" shall have the meaning assigned to that term
in any Commitment and Loan Transfer Supplement.
"Transferee" shall have the meaning assigned to that term in Section
10.12(f).
"Unrestricted Subsidiaries" shall mean Koppers Hickson, Subsidiaries
of Koppers Hickson, Koppers Power Poles Pty. Ltd., Koppers Investments (Aust.)
Pty. Limited, Koppers Seut Pty. Limited and, subject to the provisions of
Section 6.14, KAP Investments Inc.
"U.S. Dollar Equivalent" shall have the meaning assigned to that
term in Section 1.04.
1.02. Construction.
------------
In this Agreement and each Related Document, unless the context
otherwise clearly requires, references to the plural include the singular, the
singular the plural, and the part the whole; "or" has the inclusive meaning
represented by the phrase "and/or"; and the terms "property" or "properties" and
"assets" each includes all properties and assets of any kind or nature tangible
or intangible, real, personal or mixed, now existing or hereafter acquired.
References in this Agreement and the Related Documents to "determinations" by an
Agent or any Bank Party shall mean good faith determinations or good faith
estimates by such Agent or such Bank Party (in the case of quantitative
determinations) and good faith determinations or good faith beliefs by such
Agent or such Bank Party (in the case of qualitative determinations). The words
"hereof," "herein," "hereunder" and similar terms in
<PAGE>
-30-
this Agreement and the Related Documents refer to this Agreement or such Related
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such Related Document. The words "includes" and "including"
(and similar terms) in this Agreement or any Related Document means "includes
without limitation" and "including without limitation," respectively (and
similarly for similar terms). The section and other headings contained in this
Agreement and in each Related Document and the tables of contents preceding this
Agreement or such Related Document, as the case may be, are for reference
purposes only and shall not control or affect the construction of this Agreement
or such Related Document or the interpretation hereof or thereof in any respect.
Section, subsection, annex, exhibit and schedule references in this Agreement
and in each Related Document are to this Agreement or such Related Document, as
the case may be, unless otherwise specified. Each annex, exhibit and schedule
to this Agreement or any Related Document constitutes part of this Agreement or
such Related Document, as the case may be. Each of the covenants, terms and
provisions of this Agreement and the Related Documents is intended to have, and
shall have, independent effect, and compliance with any particular covenant,
term or provision shall not constitute compliance with any other covenants, term
or provision.
1.03. Accounting Principles.
---------------------
(a) Except as otherwise provided in this Agreement, all computations
and determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
assigned to such terms by GAAP.
(b) If any change in GAAP after the date of this Agreement is or
shall be required to be applied to transactions then or thereafter in existence,
and a violation of one or more provisions of this Agreement shall have occurred
or in the opinion of the Borrower would likely occur which would not have
occurred or be likely to occur if no change in accounting principles had taken
place,
(i) The parties agree that such violation shall not be considered to
constitute an Event of Default or a Potential Default for a period of
ninety (90) days from the date the Borrower notifies the Administrative
Agent of the application of this Section 1.03(b);
(ii) The parties agree in such event to negotiate in good faith
an amendment of this Agreement which shall approximate to the extent
possible the economic effect of the original financial covenants after
taking into account such change in GAAP; and
<PAGE>
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(iii) If the parties are unable to negotiate such an amendment
within such ninety (90) day period, the Borrower shall have the option of
(A) prepaying the Loans and cash collateralizing the Letters of Credit
(pursuant to applicable provisions hereof) or (B) submitting the drafting
of such an amendment to a firm of independent certified public accountants
of nationally recognized standing acceptable to the parties, which shall
complete its draft of such amendment within ninety (90) days of submission;
if the Borrower and the Agents cannot agree, the firm shall be selected by
binding arbitration in the City of Pittsburgh, Pennsylvania in accordance
with the rules then and there obtaining of the American Arbitration
Association. If the Borrower does not exercise either such option within
said period, then as used in this Agreement "GAAP" shall mean generally
accepted accounting principles in effect at the Relevant Date. The parties
agree that if the Borrower elects the option in clause (B) above, until
such firm has been selected and completes drafting such amendment, no such
violation shall constitute an Event of Default or a Potential Default.
(c) If any change in GAAP after the date of this Agreement is
required to be applied to transactions or conditions then or thereafter in
existence, and the Agents shall assert that the effect of such change is or
shall likely be to distort materially the effect of any of the definitions of
financial terms in Article I or any of the covenants of the Borrower in Section
7.01 (the "Financial Maintenance Covenants"), so that the intended economic
effect of any of the Financial Maintenance Covenants will not in fact be
accomplished,
(i) The Administrative Agent shall notify the Borrower of such
assertion, specifying the change in GAAP which is objected to, and, until
otherwise determined as provided below, the specified change in GAAP shall
not be made by the Borrower in its financial statements for the purpose of
applying the Financial Maintenance Covenants;
(ii) The parties shall follow the procedures set forth in
paragraph (ii) and the first sentence of paragraph (iii) of subsection (b)
of this Section. If the parties are unable to agree on an amendment as
provided in said paragraph (ii) and if the Borrower does not exercise
either option set forth in the first sentence of said paragraph (iii)
within the specified period, then as used in this Agreement "GAAP" shall
mean generally accepted accounting principles in effect at the Relevant
Date, except that the specified change in GAAP which is objected to by the
Agents shall not be made in applying the Financial Maintenance Covenants.
The parties agree that if the Borrower elects the option in clause (B) of
the first sentence of said paragraph (iii), until such independent firm has
been selected and completes drafting such amendment, the specified change
in GAAP shall not be made in applying the Financial Maintenance Covenants;
and
<PAGE>
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(d) All expenses of compliance with this Section 1.03 shall be paid
by the Borrower.
1.04. Currency Equivalents Generally.
------------------------------
For all purposes of any Loan or Letter of Credit (or the making or
issuance thereof) pursuant to this Agreement (but not for purposes of the
preparation of any financial statements delivered pursuant hereto), the
equivalent in Australian Dollars (the "Australian Dollar Equivalent") of an
amount in U.S. Dollars, and the equivalent in U.S. Dollars (the "U.S. Dollar
Equivalent") of an amount in Australian Dollars or other currency, shall be
determined at the Spot Rate; provided that the U.S. Dollar Equivalent of an
amount denominated in U.S. Dollars shall be such amount. For purposes of
determining compliance with any restriction determined by reference to a U.S.
Dollar amount in this Agreement (other than to the extent relating to any Loan
or Letter of Credit (or the making or issuance thereof) under this Agreement),
the U.S. Dollar Equivalent amount of transactions occurring prior to the date of
determination shall be calculated based on the Spot Rate on the date of
determination; provided that such restriction shall nonetheless be deemed not
violated if the U.S. Dollar Equivalent amount of such transactions based on the
Spot Rate in effect on the respective dates of such transactions would have been
in compliance with the applicable restriction.
ARTICLE II.
THE FACILITY
------------
2.01. The Commitments; Obligations Several.
------------------------------------
(a) The Commitments. Each Bank's "Committed Amount" with respect to
---------------
each of the Term Loan A Facility, the Term Loan B Facility and the Revolving
Credit Facility at any given time shall be equal to the amount set forth in
Annex A (or in any Commitment and Loan Transfer Supplement) as its "Term Loan A
Committed Amount," "Term Loan B Committed Amount" or "Revolving Credit Committed
Amount," as the case may be, as any such amounts may have been reduced pursuant
to Section 2.05(b) at such time, and subject to transfer as provided in Section
10.12. The Committed Amount of each Bank with respect to the Loans shall at all
times be in the Proportion set forth opposite the name of each such Bank in
Annex A (or in any Commitment and Loan Transfer Supplement) as its "Term Loan A
Proportion," "Term Loan B Proportion" or "Revolving Credit Proportion," as the
case may be.
<PAGE>
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(b) Obligations Several. The failure of any Bank to make any Loan
-------------------
shall not relieve any other Bank of its obligation to lend hereunder, but none
of the Agents nor any Bank shall be responsible for the failure of any other
Bank to make any Loan hereunder.
2.02. Loans.
-----
(a) (i) The Revolving Credit Commitments. Subject to the terms and
--------------------------------
conditions and relying upon the representations and warranties herein set forth,
each Bank with a Revolving Credit Committed Amount, severally and not jointly,
agrees (each such agreement being herein called a "Revolving Credit Commitment")
to make loans to the Borrower (the "Revolving Credit Loans") and to otherwise
extend credit to the Borrower in the form of deemed participations in the
Australian Term Loan Letter of Credit, Australian Revolving Loan Letter of
Credit, Standby or Trade Letters of Credit, or as otherwise contemplated by
Article III hereof, at any time or from time to time on or after the Closing
Date and to but not including the Revolving Credit Expiration Date. A Bank
shall have no obligation to make any Revolving Credit Loan to the extent that
(A) the aggregate of all Revolving Credit Loans of such Bank which are
outstanding plus the aggregate of all Letter of Credit Participating Interests
of such Bank in outstanding Standby or Trade Letters of Credit exceed such
Bank's Pro Rata Share (based on such Bank's Revolving Credit Proportion) of
$80,000,000 plus the amount of any Letter of Credit Participating Interests in
any Letter of Credit Unreimbursed Draw in respect of the Australian Term Loan
Letter of Credit and the Australian Revolving Loan Letter of Credit; or (B) such
Bank's Revolving Credit Exposure at any time would exceed such Bank's Revolving
Credit Committed Amount at such time. Further, the Banks shall have no
obligation to make any Revolving Credit Loans on or after the Revolving Credit
Expiration Date. To the extent not due and payable earlier as provided herein,
Revolving Credit Loans shall be due and payable on the Revolving Credit
Expiration Date.
(ii) The Term Loan Commitments.
-------------------------
(A) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Bank with a Term Loan
A Committed Amount, severally and not jointly, agrees (each such agreement
being herein called a "Term Loan A Commitment") to make loans to the
Borrower (the "Term Loan A Facility Term Loans") at any time or from time
to time on or after the Closing Date and to but not including the Term Loan
A Commitment Expiration Date. A Bank shall have no obligation to make any
Term Loan A Facility Term Loan to the extent that the sum of such Bank's
Pro Rata share of the aggregate principal amount of Term Loan A Facility
Term Loans would at any time exceed such Bank's Term Loan A Committed
Amount less such Bank's Pro Rata share of all repayments, prepayments and
Scheduled Amortization Payments applied to the Term Loan A Facility. Each
<PAGE>
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Bank's agreement shall terminate on the Term Loan A Commitment Expiration
Date to the extent that the Term Loan A Facility Term Loans have not been
made. To the extent not due and payable earlier as provided herein, Term
Loan A Facility Term Loans shall be due and payable on the Term Loan A
Expiration Date. The Borrower may not reborrow Term Loan A Facility Term
Loans following any repayment, prepayment or Scheduled Amortization Payment
with respect thereto.
(B) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Bank with a Term Loan
B Committed Amount, severally and not jointly, agrees (each such agreement
being herein called a "Term Loan B Commitment") to make a loan to the
Borrower (the "Term Loan B Facility Term Loans") on the Closing Date in an
aggregate principal amount equal to such Bank's Pro Rata share of the
aggregate principal amount of the Term Loan B Facility. Such agreement
shall terminate on the Closing Date to the extent that the Term Loan B
Facility Term Loans have not been made. To the extent not due and payable
earlier as provided herein, Term Loan B Facility Term Loans shall be due
and payable on the Term Loan B Expiration Date. The Borrower may not
reborrow Term Loan B Facility Term Loans following any repayment,
prepayment or Scheduled Amortization Payment with respect thereto.
(b) Revolving Credit. Within the limits of time and amount set forth
----------------
in Section 2.02(a)(i), and subject to the provisions of this Agreement, the
Borrower may borrow, repay and reborrow Revolving Credit Loans.
2.03. Notes.
-----
The obligation of the Borrower to repay the unpaid principal amount of
Revolving Credit Loans, Term Loan A Facility Term Loans and Term Loan B Facility
Term Loans made to it by each Bank and to pay interest thereon shall be
evidenced in part by promissory notes of the Borrower (respectively, the
"Revolving Credit Notes," the "Term Loan A Notes" and the "Term Loan B Notes"),
one of each, as applicable, for each Bank, in each case in substantially the
form of Exhibit A-1, Exhibit A-2 or Exhibit A-3, as the case may be, each dated
the Closing Date and otherwise with the blanks therein appropriately filled,
each such note to be in a face amount equal to the applicable Bank's initial
Revolving Credit Committed Amount, Term Loan A Committed Amount or Term Loan B
Committed Amount, as the case may be, and payable to the order of the applicable
Bank. The executed Revolving Credit Notes, Term Loan A Notes and Term Loan B
Notes shall be delivered by the Borrower to the Administrative Agent on the
Closing Date, and the Administrative Agent shall promptly deliver each such note
to the applicable Bank.
<PAGE>
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2.04. Making of Loans.
---------------
Subject to Section 3.11 hereof as to Swingline Loans, whenever the
Borrower desires that the Banks make Loans, the Borrower shall provide Standard
Notice to the Administrative Agent setting forth the following information:
(a) The date, which shall be a Business Day, on which such proposed
Loans are to made;
(b) The interest rate Option or Options selected in accordance with
Section 2.06(a) and the principal amounts selected in accordance with
Section 2.06(d) of the Base Rate Portion, each Funding Segment of the Euro-
Rate Portion and each Funding Segment of the As-Offered Portion of such
proposed Loans;
(c) The Euro-Rate Funding Period for each Funding Segment of the
Euro-Rate Portion of such proposed Loans, selected in accordance with
Section 2.06(c);
(d) The As-Offered Funding Period for each Funding Segment of the As-
Offered Portion of such proposed Loans, selected in accordance with Section
2.06(c);
(e) The aggregate principal amount of such proposed Loans, selected
in accordance with Section 2.06(d), which shall be the sum of the principal
amounts selected pursuant to clause (b) of this Section 2.04; and
(f) whether such Loan is to be made from the Term Loan A Facility,
Term Loan B Facility or Revolving Credit Facility in accordance with
Section 2.02.
The Administrative Agent shall promptly give notice to each Bank of the
information contained in each Standard Notice received by it as aforesaid and of
the proposed amount of such Bank's Loan. Standard Notice having been so
provided to the Administrative Agent, unless any applicable condition specified
in Article V has not been satisfied, on the date specified in such Standard
Notice each Bank shall make the proceeds of its Loan available to the
Administrative Agent at the Administrative Agent's Office no later than 2:00
o'clock p.m., Pittsburgh time, in funds immediately available at such Office,
and the Administrative Agent will make the funds so received immediately
available to the Borrower at such Office.
<PAGE>
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2.05. Commitment Fees; Reduction of the Commitments;
Mandatory Prepayments of Loans.
----------------------------------------------------
(a) Commitment Fees. The Borrower agrees to pay to the
---------------
Administrative Agent for the account of each Bank, as consideration for such
Bank's Commitment hereunder, a commitment fee, for each day from and including
the date of this Agreement (in the case of Banks which shall be parties hereto
on such date) or the date of the relevant Commitment and Loan Transfer
Supplement (in the case of Purchasing Banks),
(i) in the case of such Bank's Revolving Credit Commitment, to but not
including the Revolving Credit Expiration Date on the amount of such Bank's
Revolving Credit Committed Amount on such day less such Bank's Pro Rata
share of the Revolving Credit Loans and Letter of Credit Exposure
outstanding on such day plus such Bank's Pro Rata share of the U.S. Dollar
Equivalent amount available to be borrowed under the Australian Revolving
Loan Facility, notwithstanding any restriction on such borrowing imposed by
Section 7.22, at the rate of 37.5 basis points per annum through the first
day of the calendar month following the first determination of the
Performance Ratio, and thereafter at the rate determined by reference to
the applicable Pricing Level, as determined pursuant to Section 2.06(b), as
follows:
Pricing Commitment Fee
Level I 20 basis points
Level II 20 basis points
Level III 25 basis points
Level IV 30 basis points
Level V 37.5 basis points
Level VI 50 basis points
(ii) in the case of such Bank's Term Loan A Commitment, to but not
including the Term Loan A Commitment Expiration Date on the amount of such
Bank's Term Loan A Committed Amount on such day less such Bank's Pro Rata
share of the Term Loan A Facility Term Loans outstanding on such day less
any repayments, prepayments and Scheduled Amortization Payments applied to
the Term Loan A Facility, at the rate of 37.5 basis points per annum,
through the first day of the calendar month following the first
determination of the Performance Ratio, and thereafter at the rate
determined by reference to the applicable Pricing Level, as determined
pursuant to Section 2.06(b), as follows:
<PAGE>
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Commitment Fee
Pricing Level (per annum)
------------- -----------------
Level I 20 basis points
Level II 20 basis points
Level III 25 basis points
Level IV 30 basis points
Level V 37.5 basis points
Level VI 50 basis points
(iii) in the case of such Bank's Term Loan B Commitment, to but
not including the Closing Date on the amount of such Bank's Term Loan B
Committed Amount, at the rate of 37.5 basis points per annum,
in each case, based on a year of 365 or 366 days, as the case may be, and actual
days elapsed. The commitment fee shall be due and payable for the preceding
period for which such fee has not been paid (i) on the last day of each March,
June, September, and December , (ii) on the date of each reduction of the Term
Loan A Commitments or the Revolving Credit Commitments on the amount so reduced,
and (iii) on the date of termination of the Term Loan A Commitments or the
Revolving Credit Commitments or on the Term Loan A Commitment Expiration Date or
the Revolving Credit Expiration Date.
(b) Reduction of the Term Loan A Commitments
and the Revolving Credit Commitments.
----------------------------------------
(i) The Borrower may at any time or from time to time reduce ratably
the Revolving Credit Commitments to an amount (which may be zero) not less than
the sum of the Revolving Credit Loans and Letter of Credit Exposure then
outstanding plus the principal amount of all Revolving Credit Loans not yet made
and Letters of Credit not yet issued as to which notice has been given by the
Borrower pursuant to Section 2.04 or 3.03. Every partial reduction of the
Revolving Credit Commitments shall be in a minimum principal amount of
$5,000,000 and shall also be in an integral multiple of $1,000,000; provided
that the minimum Revolving Credit Commitment, following any partial reduction,
shall not be less than $25,000,000. Reduction of the Revolving Credit
Commitments shall be made by providing not less than three (3) Business Days'
notice (which notice shall be irrevocable) to such effect to the Administrative
Agent. After the date specified in such notice, the Revolving Credit Commitment
fee shall be calculated upon the Revolving Credit Commitments as so reduced.
(ii) The Borrower may at any time or from time to time reduce ratably
the Term Loan A Commitments to an amount (which may be zero) not less than the
sum of the Term Loan A Facility Term Loans plus the principal amount of all Term
Loan A Facility
<PAGE>
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Term Loans not yet made as to which notice has been given by the Borrower
pursuant to Section 2.04. Every partial reduction of the Term Loan A
Commitments shall be in a principal amount which is an integral multiple of
$1,000,000. Reduction of the Term Loan A Commitments shall be made by providing
not less than three (3) Business Days' notice (which notice shall be
irrevocable) to such effect to the Administrative Agent. After the date
specified in such notice, the Term Loan A Commitment fee shall be calculated
upon the Term Loan A Commitments as so reduced.
(c) Mandatory Prepayments.
---------------------
(i) Term Loan Facilities.
--------------------
(A) Within five Business Days of the date of funds being made
available to the Borrower or any of its Subsidiaries consisting of Net Cash
Proceeds required under Section 7.10(c), (d) or (e) to be applied as
provided in this Section, such Net Cash Proceeds shall be applied as
provided in Section 2.05(c)(i)(D).
(B) Within five Business Days of the date of funds being made
available to the Borrower or any of its Subsidiaries consisting of Net
Financing Proceeds other than Net Financing Proceeds which constitute
Permitted Indebtedness pursuant to Section 7.03, such Net Financing
Proceeds shall be applied as provided in Section 2.05(c)(i)(D).
(C) The Borrower shall cause to be paid on the date of receipt thereof
by the Borrower or any of its Subsidiaries, an amount equal to 50% of the
proceeds (net of underwriting discounts and commissions and other costs and
expenses directly associated therewith) from the sale by the Borrower after
the Closing Date of equity securities of the Borrower in any public
offering or private placement (other than proceeds received in connection
with the exercise of employee stock options, the sale of shares pursuant to
the Koppers Industries, Inc. Employee Stock Purchase Plan and the Koppers
Industries, Inc. Stock Redemption and Purchase Plan, or the resale of
shares to Management Investors) or from a capital contribution from any
person in the manner provided in Section 2.05(c)(i)(D) hereof.
(D) Prepayments to be applied pursuant to this Section 2.05(c)(i)(D)
shall be applied Pro Rata (treating the Australian Term Loan Facing Bank as
a Bank having a Proportion equal to the amount outstanding under the
Australian Term Loan Facility) towards amounts outstanding under the Term
Loan A Facility, the Term Loan B Facility and the Australian Term Loan
Facility based on the aggregate principal amounts outstanding thereunder
and towards the Revolving Credit Facility in respect of, and only to the
extent of, amounts outstanding thereunder due to any Letter of
Credit Participating Interests in any Letter of
<PAGE>
-39-
Credit Unreimbursed Draw under the Australian Term Loan Letter of Credit,
provided that a Bank entitled to receive a prepayment in respect of a Term
Loan B Facility Term Loan may decline such prepayment, in which case such
declining Bank's prepayment share shall be applied Pro Rata (as provided
above) to the Term Loan A Facility and the Australian Term Loan Facility,
up to the full amount outstanding thereunder and to the Revolving Credit
Facility up to, and only to the extent of, amounts outstanding thereunder
due to any Letter of Credit Participating Interests in any Letter of Credit
Unreimbursed Draw under the Australian Term Loan Letter of Credit. Any
application under this Section 2.05(c)(i)(D) shall be applied pro rata
towards the remaining Scheduled Amortization Payments under the Term Loan A
Facility, the Term Loan B Facility and/or the Australian Term Loan
Facility, as the case may be. The Committed Amount of each Bank with
respect to the Term Loan A Facility, the Term Loan B Facility or the
Revolving Credit Facility, as the case may be, shall be Pro Rata
automatically and permanently reduced to the extent of any payment applied
to such facility under this Section and the Revolving Credit Committed
Amount of each Bank shall also be Pro Rata automatically and permanently
reduced as provided in Section 3.01(b)(i).
(E) The Borrower shall pay in respect of the Term Loan A Facility, the
Term Loan B Facility and, to the extent provided in the next succeeding
sentence, the Revolving Credit Facility, and shall cause KAP to pay,
subject to the next succeeding sentence, in respect of the Australian Term
Loan Facility, each Scheduled Amortization Payment until all Term Loans,
borrowings under the Australian Term Loan Facility and Letter of Credit
Unreimbursed Draws in respect of the Australian Term Loan Letter of Credit
are paid in full, in the amounts and at the times specified in the
definition of Scheduled Amortization Payment to the extent that prepayments
have not previously been applied to such Scheduled Amortization Payments
pursuant to the terms hereof; provided that any Scheduled Amortization
Payment in respect of the Australian Term Loan Facility shall be net of the
amount of any reduction in the Letter of Credit Undrawn Availability of the
Australian Term Loan Letter of Credit attributable to a reduction in the
Australian Term Loan Interest Reserve related to a Scheduled Amortization
Payment under the Australian Term Loan Facility. Any Scheduled
Amortization Payment in respect of the Australian Term Loan Facility shall
be applied Pro Rata (treating the Australian Term Loan Facing Bank as a
Bank having a Proportion equal to the amount outstanding under the
Australian Term Loan Facility) towards amounts outstanding under the
Australian Term Loan Facility and amounts outstanding under the Revolving
Credit Facility in respect of, and only to the extent of, Letter of Credit
Participating Interests in any Letter of Credit Unreimbursed Draw under the
Australian Term Loan Letter of Credit. The Committed Amount of each Bank
with respect to the Term Loan A Facility, the Term Loan B Facility or the
<PAGE>
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Revolving Credit Facility, as the case may be, shall be Pro Rata
automatically and permanently reduced to the extent of any payment applied
to such facility under this Section and the Revolving Credit Committed
Amount of each Bank shall also be Pro Rata automatically and permanently
reduced as provided in Section 3.01(b)(i).
(ii) Revolving Facility. (A) As provided in the next succeeding
------------------
sentence, the Borrower shall prepay Swingline Loans and Revolving Credit
Loans and shall provide cash collateral with respect to outstanding Letter
of Credit Exposure to the extent that the aggregate Revolving Credit
Exposure exceeds the aggregate Revolving Credit Committed Amounts.
Such excess amount shall be applied first to the principal of Swingline
Loans, then to the principal of the Revolving Credit Loans, then to
outstanding Letter of Credit Unreimbursed Draws, and the balance shall be
deposited into the Letter of Credit Collateral Account.
The Borrower shall cause KAP to pay all amounts owing in respect of
KAP's obligations under the Australian Revolving Loan Facility, including
repayment of all outstanding borrowings thereunder, on or prior to the
Revolving Credit Expiration date.
(B) The Borrower shall prepay or repay any Letter of Credit
Participating Interests in any Letter of Credit Unreimbursed Draw under the
Australian Term Loan Letter of Credit in accordance with Sections
2.05(c)(i)(D), 2.05(c)(i)(E) and 2.08(c) of this Agreement.
2.06. Interest Rates.
--------------
(a) Optional Bases of Borrowing. The unpaid principal amount of the
---------------------------
Loans shall bear interest for each day until due on one or more bases selected
by the Borrower from among the interest rate Options set forth below, it being
understood that, subject to the provisions of this Agreement, including but not
limited to Section 3.11 hereof as to Swingline Loans, and so long as the
aggregate number of Funding Segments of the Euro-Rate Portion of the Loans at
any time shall not exceed twelve, the Borrower may select different Options to
apply simultaneously to different Portions of the Loans and may select different
Funding Segments to apply simultaneously to different parts of the Euro-Rate
Portion of the Loans:
(i) Base Rate Option: A rate per annum (computed on the basis of a
----------------
year of 365 or 366 days, as the case may be, and actual days elapsed) for
each day equal to the Base Rate for such day plus the Applicable Margin for
such day, such interest
<PAGE>
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rate to change automatically from time to time effective as of the
effective date of each change in the Base Rate. "Base Rate," as used
herein, shall mean, for any day, the greater of (A) the Prime Rate for such
day and (B) 1/2% over the Federal Funds Effective Rate for such day, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Prime Rate or Federal Funds Effective
Rate. "Prime Rate," as used herein, shall mean the interest rate per annum
announced from time to time by the Administrative Agent as its prime rate,
such rate to change automatically effective as of the effectiveness of each
announced change in such prime rate. The Prime Rate may be greater or less
than the interest rates charged by the Administrative Agent (in its
capacity as a lender) to other borrowers and is not solely based or
dependent upon the interest rate which the Administrative Agent (in such
capacity) may charge any particular borrower or class of borrowers.
"Federal Funds Effective Rate," as used herein, shall mean, for any day,
the rate per annum (rounded upward to the nearest 1/100 of 1%) announced by
the Federal Reserve Bank of New York (or any successor) as being the
weighted average of the rates on overnight Federal funds transactions
arranged by Federal funds brokers on the previous trading day, as computed
and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided that if such Federal
Reserve Bank (or its successor) does not announce such rate for any day,
the "Federal Funds Effective Rate" for such day shall be the average rate
determined in good faith by the Administrative Agent (which determination
shall be conclusive absent manifest error) that it was charged for its
Federal funds transactions on such previous trading day.
(ii) Euro-Rate Option: A rate per annum (based on a year of 360
----------------
days and actual days elapsed) for each day equal to the Euro-Rate for such
day plus the Applicable Margin. "Euro-Rate," as used herein, shall mean,
for any day, for each Funding Segment of the Euro-Rate Portion
corresponding to a proposed or existing Euro-Rate Funding Period, the rate
per annum determined by the Administrative Agent by dividing (the resulting
quotient to be rounded upward to the nearest 1/100 of 1%) (A) the rate of
interest (which shall be the same for each day in such Euro-Rate Funding
Period) determined in good faith by the Administrative Agent (which
determination shall be conclusive absent manifest error) to be the average
of the rates per annum for deposits in Dollars offered to major money
center banks in the London interbank market at approximately 11:00 a.m.,
London time, two (2) London Business Days prior to the first day of such
Euro-Rate Funding Period for delivery on the first day of such Euro-Rate
Funding Period in amounts comparable to such Funding Segment and having
maturities comparable to such Euro-Rate Funding Period by (B) a number
equal to 1.00 minus the Euro-Rate Reserve Percentage.
<PAGE>
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The "Euro-Rate" may also be expressed by the following formula:
[average of the rates offered to major money
center banks in the London interbank market]
Euro-Rate = determined by the Administrative Agent per subsection (A) ]
----------------------------------------------------------
[1.00 - Euro-Rate Reserve Percentage ]
The "Euro-Rate Reserve Percentage" for any day shall mean the maximum
effective percentage (expressed as a decimal fraction, rounded upward to
the nearest 1/100 of 1%), as determined in good faith by the Administrative
Agent (which determination shall be conclusive absent manifest error),
which is in effect on such day as prescribed by the Board of Governors of
the Federal Reserve System (or any successor) for determining the reserve
requirements (including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to
as "Eurocurrency liabilities") of a member bank in such System. The Euro-
Rate shall be adjusted automatically as of the effective date of each
change in the Euro-Rate Reserve Percentage. The Euro-Rate shall be
calculated in accordance with the foregoing whether or not any Bank is
actually required to hold reserves in connection with its eurocurrency
funding or, if it is required to hold reserves, is required to hold
reserves at the "Euro-Rate Reserve Percentage" as herein defined. The
Administrative Agent shall give promptly notice to the Borrower and to the
Banks of the Euro-Rate so determined or adjusted, which determination or
adjustment, if made in good faith, shall be conclusive absent manifest
error.
(iii) As-Offered Rate Option: A rate per annum (computed on the
----------------------
basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) equal to the As-Offered Rate for such day plus the Applicable
Margin. "As-Offered Rate," as used herein, shall mean, for any day, for
each Funding Segment of the As-Offered Rate Portion corresponding to a
proposed or existing As-Offered Rate Funding Period, a rate per annum
offered by the Swingline Bank in its sole discretion to Borrower from time
to time.
Notwithstanding the foregoing, Term Loan A Facility Term Loans and Revolving
Credit Loans may be made only at the Base Rate Option and the Euro-Rate Option,
Term Loan B Facility Term Loans may be made only at the Euro-Rate Option and
Swingline Loans may be made only at the Base Rate Option and the As-Offered Rate
Option.
"Applicable Margin" is based on the applicable Pricing Level and shall
mean for each Option the rate per annum set forth below:
<PAGE>
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<TABLE>
<CAPTION>
Applicable Margin
<S> <C> <C>
Term Loan A Facility
Term Loans and
Revolving Credit Loans Term Loan B
(including Swingline Loans) Facility Term Loans
--------------------------- -------------------
</TABLE>
<TABLE>
<CAPTION>
Euro-Rate and
As-Offered
Pricing Level Base Rate Rate Euro-Rate
- ------------- --------- ---- ---------
<S> <C> <C> <C>
Level I 0 basis points 75 basis points 175 basis points
Level II 0 basis points 100 basis 175 basis points
points
Level III 25 basis points 125 basis 175 basis points
points
Level IV 50 basis points 150 basis 200 basis points
points
Level V 75 basis points 175 basis 225 basis points
points
Level VI 100 basis points 200 basis 250 basis points
points
</TABLE>
(b) Pricing Levels. For the purposes of Sections 2.06(a) and
--------------
2.05(a), the applicable level of pricing (the "Pricing Level") shall be
determined as follows:
<TABLE>
<CAPTION>
Pricing Level Performance Ratio
------------- -----------------
<S> <C>
Level I Less than 2.25x
Level II 2.25x - 2.49x
Level III 2.50x - 2.99x
Level IV 3.00x - 3.49x
Level V 3.50x - 3.99x
Level VI Greater than or equal to 4.00x
</TABLE>
provided, that through the first day of the calendar month following the first
determination of the Performance Ratio, the Applicable Margin shall equal (i)
175 basis points in respect of Euro-Rate based and As-Offered Rate based Loans
which are Term Loan A Facility Term Loans and Revolving Credit Loans (including
Swingline Loans), (ii) 225 basis points in respect of Euro-Rate based Loans
which are Term Loan B Facility Term Loans and (iii) 75 basis points in respect
of Base Rate based Loans. Together with each delivery of financial statements
pursuant to Section 6.01(a) or 6.01(b), the Borrower shall deliver a
certificate, duly completed and signed by the Treasurer, Controller or Chief
Financial Officer of Borrower, setting forth the calculation of the Performance
Ratio, as supported by the
<PAGE>
-44-
accompanying financial statements, stating the Pricing Level applicable to such
Performance Ratio and calculating the U.S. Dollar Equivalent of the Revolving
Credit Exposure. Except as expressly set forth herein, any change in the
applicable Pricing Level shall be effective as of the first day of the calendar
month following the month in which the applicable financial statements and
certificate are received by the Administrative Agent.
(c) Funding Periods. Any time the Borrower shall select, convert to
---------------
or renew the Euro-Rate Option or the As-Offered Rate Option to apply to any part
of the Loans, the Borrower shall specify, with respect to the Euro-Rate Option,
one or more periods of one, two, three or six months (the "Euro-Rate Funding
Periods"), and, with respect to the As-Offered Rate Option, one or more periods
of days (the "As-Offered Rate Funding Period") during which such Option shall
apply; provided, that:
(i) Each Euro-Rate Funding Period shall begin on a London Business
Day, and the duration of each Euro-Rate Funding Period shall be determined
in accordance with the definition of the term "month" herein;
(ii) The Borrower may not select a Euro-Rate Funding Period or an
As-Offered Rate Funding Period that would end after the Revolving Credit
Expiration Date, the Term Loan A Expiration Date or the Term Loan B
Expiration Date, as the case may be;
(iii) The Borrower shall, in selecting any Euro-Rate Funding Period
or any As-Offered Rate Funding Period, allow for foreseeable mandatory
prepayment of the Loans; and
(iv) The Borrower may not select an As-Offered Rate Funding Period
longer than 30 days.
(d) Transactional Amounts. Subject to Section 3.11 hereto as to
---------------------
Swingline Loans, every selection of, conversion from, conversion to, or renewal
of, an interest rate Option, and every payment or prepayment of any Loans
(except pursuant to Section 2.05(c)) shall be in a principal amount such that,
after giving effect thereto, the aggregate principal amount of each Portion
shall be equal to $1,000,000 or an integral multiple thereof.
(e) Interest After Maturity. After the principal amount of the Base
-----------------------
Rate Portion of any Loan shall have become due (by acceleration or otherwise),
such Portion shall bear interest for each day until paid (before and after
judgment) at a rate per annum (based on a year of 365 or 366 days, as the case
may be) which shall be 2% above the then current Base Rate Option, such interest
rate to change automatically from time to time effective as of the effective
date of each change in the Base Rate. After the principal amount of any Euro-
<PAGE>
-45-
Rate Portion or any As-Offered Rate Portion of any Loan shall have become due
(by acceleration or otherwise), such Portion shall bear interest for each day
until paid (before and after judgment) (i) until the end of the then current
Euro-Rate Funding Period or As-Offered Rate Funding Period, as the case may be,
at a rate per annum 2% above the rate otherwise applicable to such Loan and (ii)
thereafter in accordance with the previous sentence.
(f) Euro-Rate Unascertainable; Impracticability. If
-------------------------------------------
(i) on any date on which a Euro-Rate would otherwise be set the
Administrative Agent (in the case of (A) or (B) below) or any Bank (in the
case of (C) below) shall have in good faith determined (which determination
shall be conclusive) that:
(A) adequate and reasonable means do not exist for ascertaining
such Euro-Rate, or
(B) a contingency has occurred which materially and adversely
affects the interbank Eurodollar market, or
(C) the effective cost to such Bank of funding a proposed
Funding Segment of the Euro-Rate Portion from a Corresponding Source
of Funds shall exceed the Euro-Rate applicable to such Funding
Segment, or
(ii) at any time any Bank shall have determined in good faith (which
determination shall be conclusive) that the making, maintenance or funding
of any part of the Euro-Rate Portion has been made impracticable or
unlawful by compliance by such Bank or a Notional Euro-Rate Funding Office
in good faith with any Law or guideline or interpretation or administration
thereof by any Official Body charged with the interpretation or
administration thereof or with any request or directive of any such
Official Body (whether or not having the force of law);
then, and in any such event, the Administrative Agent or such Bank (the
"Affected Party"), as the case may be, may notify the Borrower of such
determination (and any Bank giving such notice shall so notify the
Administrative Agent). Upon such date as shall be specified in such notice
(which shall not be earlier than one (1) Business Day following the date such
notice is given), the obligation of the Banks or the Affected Party to allow the
Borrower to select, convert to or renew the Euro-Rate Option shall be suspended
until the Administrative Agent or such Affected Party, as the case may be, shall
have later notified the Borrower (and any Affected Party giving such notice
shall so notify the Administrative Agent) of the Administrative Agent's or such
Affected Party's determination in good faith (which determination shall be
conclusive) that the circumstance giving rise to such previous
<PAGE>
-46-
determination no longer exists. If any Affected Party notifies the Borrower of
a determination under subsection (ii) of this Section 2.06(f), the Euro-Rate
Portion of the Loans of such Affected Party shall automatically be converted to
the Base Rate Option as of the date specified in such notice (and accrued
interest thereon shall be due and payable on such date).
If at the time the Administrative Agent or any Bank makes a
determination under subsection (i) or (ii) of this Section 2.06(f) the Borrower
has previously notified the Administrative Agent that it wishes to select,
convert to or renew the Euro-Rate Option with respect to any proposed Loan, but
such Loan has not yet been made, such notification shall be deemed to provide
for selection of, conversion to or renewal of the Base Rate Option instead of
the Euro-Rate Option with respect to such Loan or, in the case of a
determination by a Bank, the Loan of such Bank.
2.07. Conversion or Renewal of Interest
Rate Options.
---------------------------------
(a) Conversion or Renewal. Subject to Section 3.11 hereof as to
---------------------
Swingline Loans, and subject to the provisions of Section 2.11(b), the Borrower
may convert any part of its Loans from any interest rate Option or Options to
any other interest rate Option or Options and may renew the Euro-Rate Option as
to any Funding Segment of the Euro-Rate Portion:
(i) At any time with respect to conversion from the Base Rate
Option; or
(ii) At the expiration of any Euro-Rate Funding Period with respect
to conversions from or renewals of the Euro-Rate Option, as to the Funding
Segment corresponding to such expiring Euro-Rate Funding Period.
Whenever the Borrower desires to convert or renew any interest rate
Option or Options, the Borrower shall provide to the Administrative Agent
Standard Notice setting forth the following information:
(w) The date, which shall be a Business Day, on which the proposed
conversion or renewal is to be made;
(x) The principal amounts selected in accordance with Section 2.06(d)
of the Base Rate Portion and each Funding Segment of the Euro-Rate Portion
to be converted from or renewed;
<PAGE>
-47-
(y) The interest rate Option or Options selected in accordance with
Section 2.06(a) and the principal amounts selected in accordance with
Section 2.06(d) of the Base Rate Portion and each Funding Segment of the
Euro-Rate Portion to be converted to; and
(z) With respect to each Funding Segment to be converted to or
renewed, the Euro-Rate Funding Period selected in accordance with Section
2.06(d) to apply to such Funding Segment.
Standard Notice having been so provided, after the date specified in such
Standard Notice, interest shall be calculated upon the principal amount of the
Loans as so converted or renewed. Interest on the principal amount of any part
of Loans converted or renewed shall be due and payable on the conversion or
renewal date.
(b) Failure to Convert or Renew. Absent due notice from the Borrower
---------------------------
of conversion or renewal in the circumstance described in Section 2.07(a)(ii),
any part of the Euro-Rate Portion for which such notice is not received shall be
converted automatically to the Base Rate Option on the last day of the expiring
Euro-Rate Funding Period.
2.08. Payments and Prepayments.
------------------------
(a) The Borrower shall have the right at its option to prepay the
Loans in whole or part without premium or penalty (but subject to the provisions
of Section 2.11(b)):
(i) At any time with respect to any part of the Base Rate Portion; or
(ii) At the expiration of any Euro-Rate Funding Period or any As-
Offered Rate Funding Period with respect to prepayment of the Euro-Rate
Portion or the As-Offered Rate Portion, as the case may be, with respect to
any part of the Funding Segment corresponding to such expiring Euro-Rate
Funding Period or As-Offered Rate Funding Period, as the case may be.
If at any time the aggregate Revolving Credit Exposure shall exceed
the aggregate Revolving Credit Committed Amounts, the Borrower shall immediately
prepay a principal amount of Revolving Credit Loans as provided in Section
2.05(c)(ii).
(b) Subject to Section 3.11 hereto as to Swingline Loans, whenever
the Borrower desires or is required to prepay any part of the Loans, it shall
provide Standard Notice to the Administrative Agent setting forth the following
information:
<PAGE>
-48-
(i) The date, which shall be a Business Day, on which the proposed
prepayment is to be made;
(ii) The principal amounts selected in accordance with Section
2.06(d) of the Base Rate Portion and each part of each Funding Segment of
the Euro-Rate Portion to be prepaid;
(iii) The total principal amount of such prepayment, selected in
accordance with Section 2.06(d), which shall be the sum of the principal
amounts of the Loans to be prepaid; and
(iv) The amount of such prepayment to be applied to the Term Loans
(including amounts outstanding under the Australian Term Loan Facility) and
the amount of such prepayment to be applied to Revolving Credit Loans.
Standard Notice having been so provided, on the date specified in such Standard
Notice the principal amounts of the Base Rate Portion and each part of the Euro-
Rate Portion specified in such notice, together with interest on such principal
amounts to such date, shall be due and payable.
(c) Prepayments to be applied to Term Loans pursuant to this Section
2.08 shall be applied Pro Rata (treating the Australian Term Loan Facing Bank as
a Bank having a Proportion equal to the amount outstanding under the Australian
Term Loan Facility) towards amounts outstanding under the Term Loan A Facility,
the Term Loan B Facility and the Australian Term Loan Facility based on the
aggregate principal amount outstanding thereunder and towards the Revolving
Credit Facility in respect of, and only to the extent of, amounts outstanding
thereunder due to any Letter of Credit Participating Interests in any Letter of
Credit Unreimbursed Draw under the Australian Term Loan Letter of Credit,
provided that a Bank entitled to receive a prepayment in respect of a Term Loan
B Facility Term Loan may decline such prepayment, in which case such declining
Bank's prepayment share shall be applied Pro Rata (as provided above) to the
Term Loan A Facility and the Australian Term Loan Facility, up to the full
amount outstanding thereunder and to the Revolving Credit Facility up to, and
only to the extent of, amounts outstanding thereunder due to any Letter of
Credit Participating Interests in any Letter of Credit Unreimbursed Draw under
the Australian Term Loan Letter of Credit. Any application under this Section
2.08(c) shall be applied pro rata towards the remaining Scheduled Amortization
Payments under the Term Loan A Facility, the Term Loan B Facility and/or the
Australian Term Loan Facility, as the case may be. The Committed Amount of each
Bank with respect to the Term Loan A Facility, the Term Loan B Facility or the
Revolving Credit Facility, as the case may be, shall be Pro Rata automatically
and permanently reduced to the extent of any payment applied to such facility
under this Section and the Revolving Credit Committed Amount of each Bank
<PAGE>
-49-
shall also be Pro Rata automatically and permanently reduced as provided in
Section 3.01(b)(i).
2.09. Interest Payment Dates.
----------------------
Interest on the Base Rate Portion shall be due and payable on each
March 31, June 30, September 30 and December 31. Interest on each Funding
Segment of the As-Offered Rate Portion shall be due and payable on the last day
of the corresponding As-Offered Rate Funding Period. Interest on any Funding
Segment of the Euro-Rate Portion shall be due and payable on the last day of the
corresponding Euro-Rate Funding Period and, if such Euro-Rate Funding Period is
longer than three months, also every third month during such Euro-Rate Funding
Period. After maturity of any part of the Loans (by acceleration or otherwise),
interest on such part shall be due and payable on demand.
2.10. Pro Rata Treatment and Payments.
-------------------------------
Each borrowing from the Banks, each conversion or renewal of any
interest rate Option and each payment or prepayment to the Banks (except as
otherwise specifically provided herein, including with respect to borrowings in
respect of the Swingline Loans) shall be made Pro Rata (which, in the case of
prepayments of Term Loans, shall treat the Australian Term Loan Facing Bank as a
Bank having a Proportion equal to the amount outstanding under the Australian
Term Loan Facility) and from and to each Bank on the same date. All payments and
prepayments to be made in respect of principal, interest, fees or other amounts
due from the Borrower hereunder or under any Related Document (other than the
Australian Credit Facilities) shall be payable at 12:00 Noon, Pittsburgh time,
on the day when due without presentment, demand, protest or notice of any kind,
all of which are hereby expressly waived, and a cause of action therefor shall
immediately accrue. Except for payments under Section 2.11, 2.12 or 10.06 or in
respect of the Australian Credit Facilities, such payments shall be made to the
Administrative Agent at its Office in Dollars in funds immediately available at
such Office without setoff, counterclaim or other deduction of any nature, and
payments under Section 2.11, 2.12 or 10.06 shall be made to the applicable Bank,
Issuing Bank or the Swingline Bank at such domestic account as it may specify to
the Borrower from time to time in funds immediately available at such account.
Any payment received by the Administrative Agent or any Bank, any Issuing Bank
or the Swingline Bank after 12:00 noon, Pittsburgh time, on any day shall be
deemed to have been received on the next succeeding Business Day. The
Administrative Agent shall distribute to the Banks, the Issuing Banks or the
Swingline Bank, as the case may be, all such payments received by the
Administrative Agent for their respective accounts as promptly as practicable
after receipt by the Administrative Agent. To the extent permitted by law, after
there shall have become due (by acceleration or otherwise) interest, fees or any
other amounts due from
<PAGE>
-50-
the Borrower hereunder or under any of the Related Documents (other than the
Australian Credit Facilities) (excluding overdue principal, which shall bear
interest as described in Section 2.06(e), but including interest payable under
this Section 2.10), such amounts shall bear interest for each day until paid
(before and after judgment), payable on demand, at a rate per annum (based on a
year of 365 or 366 days, as the case may be, and actual days elapsed) 2% above
the then current Base Rate Option, such interest rate to change automatically
from time to time effective as of the effective date of each change in the Base
Rate. To the extent permitted by law, interest accrued on any amount which has
become due hereunder or under any Related Document (other than the Australian
Credit Facilities) shall compound on a day-by-day basis, and hence shall be
added daily to the overdue amount to which such interest relates.
All payments and prepayments, including Scheduled Amortization
Payments, required to be made hereunder in respect of borrowings under the
Australian Credit Facilities shall be payable as provided in the Australian
Credit Facilities, on the day when due without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived. Such payments, to
the extent not determined in Australian Dollars, shall be in the amount of the
Australian Dollar Equivalent, and shall be made by KAP to both the Australian
Term Loan Facing Bank or the Australian Revolving Loan Facing Bank, as the case
may be, as provided in the Australian Credit Facilities in immediately available
Australian Dollar funds without setoff, counterclaim or other deduction of any
nature.
2.11. Additional Compensation in Certain Circumstances.
------------------------------------------------
(a) Increased Costs or Reduced Return Resulting from Taxes, Reserves,
-----------------------------------------------------------------
Capital Adequacy Requirements, Expenses, Etc. If any Law or guideline or
- --------------------------------------------
interpretation or application thereof by any Official Body charged with the
interpretation or administration thereof or compliance with any request or
directive of any Official Body (whether or not having the force of law) now
existing or hereafter adopted:
(i) subjects any Bank Party or any Notional Euro-Rate Funding Office
to any tax or changes the basis of taxation with respect to this Agreement,
the Notes, the Loans, the Letters of Credit, the Letter of Credit
Participating Interests or the Swingline Loan Participating Interests, or
payments by the Borrower of principal, interest, fees or other amounts due
from the Borrower hereunder or under the Related Documents (except for
taxes on the overall net income of such Bank Party or such Notional Euro-
Rate Funding Office imposed by the jurisdiction in which such Bank Party's
principal office or Notional Euro-Rate Funding Office is located),
(ii) imposes, modifies or deems applicable any reserve, special
deposit, insurance assessment or similar requirement against credits or
commitments to extend credit extended by, assets (funded or contingent) of,
deposits with or for the account
<PAGE>
-51-
of, or other acquisitions of funds by, such Bank Party or any Notional
Euro-Rate Funding Office (other than requirements expressly included herein
in the determination of the Euro-Rate hereunder),
(iii) imposes, modifies or deems applicable any capital adequacy or
similar requirement (A) against assets (funded or contingent) of, or
credits or commitments to extend credit extended by, any Bank Party or any
Notional Euro-Rate Funding Office, or (B) otherwise applicable to the
obligations of any Bank Party or any Notional Euro-Rate Funding Office
under this Agreement, or
(iv) imposes upon any Bank Party or any Notional Euro-Rate Office
any other condition or expense with respect to this Agreement or the
Related Documents or its making, maintenance or funding of any Loan, Letter
of Credit, Letter of Credit Participating Interest or Swingline Loan
Participating Interest, or any security therefor,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank Party or any Notional Euro-Rate Funding Office or, in the case of clause
(iii), any person controlling a Bank Party, with respect to this Agreement, the
Related Documents or the making, maintenance or funding of any Loan, Letter of
Credit or Letter of Credit Participating Interest or Swingline Loan
Participating Interest (or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the rate of return on such Bank
Party's or controlling person's capital, taking into consideration such Bank
Party's or controlling person's policies with respect to capital adequacy) by an
amount which such Bank Party deems to be material (such Bank Party being deemed
for this purpose to have made, maintained or funded each Funding Segment of the
Euro-Rate Portion from a Corresponding Source of Funds), such Bank Party may
from time to time notify the Borrower of the occurrence of any such event and
the amount determined in good faith (using any averaging and attribution method)
by such Bank Party (which determination shall be conclusive) to be necessary to
compensate such Bank Party or such Notional Euro-Rate Funding Office for such
increase, reduction or imposition. Such amount shall be due and payable by the
Borrower to such Bank Party ten (10) Business Days after such notice is given by
such Bank Party to the Borrower. If requested by the Borrower, such Bank Party
shall deliver to the Borrower a certificate, which certificate shall be
conclusive absent manifest error, as to the amount due and payable under this
Section 2.11(a) from time to time and the method of calculating such amount.
(b) Indemnity. In addition to the compensation required by
---------
subsection (a) of this Section 2.11, the Borrower shall indemnify each Bank
against any loss or expense
<PAGE>
-52-
(including loss of margin) which such Bank has sustained or incurred as a
consequence of any:
(i) payment or prepayment or conversion of any Funding Segment of
any Euro-Rate Portion or any As-Offered Rate Portion on a day other than
the last day of the corresponding Euro-Rate Funding Period or As-Offered
Rate Funding Period, as the case may be (whether or not such payment,
prepayment or conversion is mandatory or automatic and whether or not such
payment, prepayment or conversion is then due),
(ii) attempt by the Borrower to revoke (expressly, by later
inconsistent notices or otherwise) in whole or in part any notice stated
herein to be irrevocable (a Bank having in its sole discretion the options
(A) to give effect to such attempted revocation and obtain indemnity under
this Section 2.11(b) or (B) to treat such attempted revocation as having no
force or effect, as if never made), or
(iii) default by the Borrower in the performance or observance of
any covenant or condition contained in this Agreement or any Related
Document, including any failure of the Borrower to pay when due (by
acceleration or otherwise) any principal, interest, fee or any other amount
due hereunder or under any Related Document.
If the Bank sustains or incurs any such loss or expense, it may from time to
time notify the Borrower of the amount determined in good faith by such Bank
(which determination shall be conclusive) to be necessary to indemnify such Bank
for such loss or expense (each Bank being deemed for this purpose to have made,
maintained or funded each Euro-Rate Portion from a Corresponding Source of
Funds). Such amount shall be due and payable by the Borrower to such Bank ten
(10) Business Days after such notice is given (and any Bank giving any such
notice shall notify the Administrative Agent of the amount so demanded). If
requested by the Borrower, such Bank shall deliver to the Borrower a
certificate, which certificate shall be conclusive absent manifest error, as to
the amount due and payable under this Section 2.11(b) from time to time and the
method of calculating such amount.
2.12. Taxes.
-----
(a) Payments Net of Taxes. All payments made by the Borrower under
---------------------
this Agreement or any Related Document shall be made free and clear of, and
without reduction or withholding for or on account of, any present or future
income, stamp, documentary, excise or other taxes, levies, imposts, duties,
charges, fee, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Official Body, and all liabilities with
respect thereto, excluding;
<PAGE>
-53-
(i) in the case of each Bank Party, income or franchise taxes
imposed on such Bank Party by the jurisdiction under the laws of which such
Bank Party is organized or any political subdivision or taxing authority
thereof or therein or as a result of a connection between such Bank Party
and any jurisdiction other than a connection resulting solely from this
Agreement and the transactions contemplated hereby,
(ii) in the case of each Bank Party, income or franchise taxes
imposed by any jurisdiction in which such Bank Party's lending offices
which make or book Loans or issue Letters of Credit are located or any
political subdivision or taxing authority thereof or therein, and
(iii) any taxes payable solely as a result of the failure of a Bank
described in Section 10.12(g) to timely deliver the forms described therein
to the extent required thereby, other than if such failure is due to a
change in law occurring after the date on which a form originally was
required to be provided or if no such form is required
(all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld or deducted from any amounts payable to any Bank Party under this
Agreement or any Related Document, the Borrower shall pay the relevant amount of
such Taxes and the amounts so payable to such Bank Party shall be increased to
the extent necessary to yield to such Bank Party (after payment of all Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement and the Related Documents. Whenever any
Taxes are paid by the Borrower with respect to payments made in connection with
this Agreement or any Related Document, as promptly as possible thereafter, the
Borrower shall send to the Administrative Agent for its own account or for the
account of such other Bank Party, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof.
(b) Indemnity. The Borrower hereby indemnifies each Bank Party for
---------
the full amount of all Taxes attributable to or arising from payments by or on
behalf of the Borrower to such Bank Party hereunder or under any of the Related
Documents, any Taxes paid by such Bank Party, and any present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any Taxes (including any incremental Taxes, interest or
penalties which may become payable by such Bank Party as a result of any failure
to pay such Taxes). Such indemnification shall be made within five (5) Business
Days from the date such Bank Party makes written demand therefor.
2.13. Funding by Branch, Subsidiary or Affiliate.
------------------------------------------
<PAGE>
-54-
(a) Notional Funding. Each Bank shall have the right from time to
----------------
time, prospectively or retrospectively, without notice to the Borrower, to deem
any branch, subsidiary or affiliate of such Bank to have made, maintained or
funded any part of the Euro-Rate Portion at any time; provided, however, that
such Bank shall not have such right if such transfer would cause an event or
condition described in Section 2.06(f)(ii) or increase compensation payable by
the Borrower under Section 2.11(a). Any branch, subsidiary or affiliate so
deemed shall be known as a "Notional Euro-Rate Funding Office." Such Bank shall
deem any part of the Euro-Rate Portion or the funding therefor to have been
transferred to a different Notional Euro-Rate Funding Office if such transfer
would avoid or cure an event or condition described in Section 2.06(f)(ii) or
would lessen compensation payable by the Borrower under Section 2.11(a), and if
such Bank determines in its sole discretion that such transfer would be
practicable and would not have a material adverse effect on the affected part of
the Euro-Rate Portion, such Bank or any Notional Euro-Rate Funding Office (it
being assumed for purposes of such determination that each part of the Euro-Rate
Portion is actually made or maintained by or funded through the corresponding
Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be
selected by such Bank without regard to such Bank's actual methods of making,
maintaining or funding the Euro-Rate Portion or any sources of funding actually
used by or available to such Bank.
(b) Actual Funding. Each Bank shall have the right from time to time
--------------
to make or maintain any part of the Euro-Rate Portion by arranging for a branch,
subsidiary or affiliate of such Bank to make or maintain such part of the Euro-
Rate Portion; provided, however, that such Bank shall not have such right if
such transfer would cause an event or condition described in Section 2.06(f)(ii)
or increase compensation payable by the Borrower under Section 2.11(a). Such
Bank shall have the right to (i) hold any applicable Note payable to its order
for the benefit and account of such branch, subsidiary or affiliate or (ii)
request the Borrower to issue one or more promissory notes in the principal
amount of such part of the Euro-Rate Portion in substantially the form of
Exhibit A-1, Exhibit A-2, Exhibit A-3 or Exhibit B, as the case may be, with the
blanks appropriately filled, payable to such branch, subsidiary or affiliate and
with appropriate changes reflecting that the holder thereof is not obligated to
make any additional Loans to the Borrower. The Borrower agrees to comply
promptly with any request under subsection (ii) of this Section 2.13(b). If any
Bank causes a branch, subsidiary or affiliate to make or maintain any part of
the Euro-Rate Portion hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be applicable to
such part of the Euro-Rate Portion and to any Note payable to the order of such
branch, subsidiary or affiliate to the same extent as if such part of the Euro-
Rate Portion were made or maintained and such note were a Note payable to such
Bank's order.
2.14. Currency Exchange Fluctuations.
------------------------------
<PAGE>
-55-
(a) The Borrower will implement and maintain internal controls, and
shall cause KAP to implement and maintain internal controls, to monitor the
borrowings and repayments of Loans by the Borrower and borrowings and interest
reserves under the Australian Credit Facilities by KAP and the issuance of and
drawings under Letters of Credit, with the object of preventing any request for
the making of a Loan or the issuance of a Letter of Credit that would result in
the aggregate Revolving Credit Exposure of the Banks being in excess of the
aggregate Revolving Credit Commitments then in effect and of promptly
identifying and remedying any circumstance where, by reason of changes in
exchange rates, the aggregate Revolving Credit Exposure of the Banks exceeds the
aggregate Revolving Credit Commitments then in effect.
(b) If on any Computation Date the Administrative Agent shall have
determined that the U.S. Dollar Equivalent of the aggregate Revolving Credit
Exposure of the Banks exceeds the aggregate Revolving Credit Commitments due to
a change in currency exchange rates between the U.S. Dollar and the Australian
Dollar, then the Administrative Agent shall give notice to the Borrower that a
prepayment in the amount of such excess (or, if no Revolving Credit Loans are
outstanding, that the provision of cash collateral for outstanding Letters of
Credit in the amount of such excess) is required under Section 2.05(c)(ii)
within 5 Business Days unless, during such period, whether by currency
fluctuation or otherwise, such excess shall have been eliminated in its
entirety.
ARTICLE III.
THE SUBFACILITIES
-----------------
3.01. Letters of Credit.
-----------------
(a) Generally. Subject to the terms and conditions of this Agreement,
---------
and relying upon the representations and warranties herein set forth and upon
the agreements of the Banks set forth in Sections 3.04 and 3.05, the Standby and
Trade LC Issuing Bank agrees to issue for the account of the Borrower standby
letters of credit and documentary or import (trade) letters of credit as
provided in this Article III (each such letter of credit, as amended, modified
or supplemented from time to time, a "Standby or Trade Letter of Credit" and
collectively the "Standby or Trade Letters of Credit"); provided that, on the
date of the issuance of any Standby or Trade Letter of Credit, and after giving
effect to such issuance, the aggregate Revolving Credit Exposure shall not
exceed the aggregate Revolving Credit Commitments at such time; and provided,
further, that the aggregate Letter of Credit Exposure at any time outstanding
shall not exceed $20,000,000 plus the U.S. Dollar Equivalent of the Letter of
Credit Exposure of the Australian Term Loan Letter of Credit and the Australian
Revolving Loan Letter of Credit. Each Standby or Trade Letter of Credit
<PAGE>
-56-
shall (a) be for a purpose which is in the ordinary course of the Borrower's
business; (b) be in favor of such beneficiary or beneficiaries as the Borrower
shall specify and as shall be approved by the Standby or Trade LC Issuing Bank
in its reasonable discretion; (c) be denominated in Dollars; and (d) have an
expiration date no later than, (x) in the case of standby letters of credit, two
years after its date of issuance, and (y) in the case of documentary or import
(trade) letters of credit, 180 days after its date of issuance, provided that no
Standby or Trade Letter of Credit shall have an expiration date which is later
than five days prior to the Revolving Credit Expiration Date; provided, further,
that, on the fifth day prior to the Revolving Credit Expiration Date, the
Borrower shall provide for the termination and cancellation, in a manner
satisfactory to the Banks, of each then outstanding Standby or Trade Letter of
Credit.
(b) Australian Letters of Credit.
----------------------------
(i) Australian Term Loan Letter of Credit. On the Closing Date the
-------------------------------------
Australian LC Issuing Bank will issue to the Australian Term Loan Facing
Bank for the account of the Borrower an A$ denominated letter of credit
with an initial Letter of Credit Undrawn Availability equal to the
Australian Dollar Equivalent of $40,000,000, substantially in the Form of
Exhibit I-1 hereto (the "Australian Term Loan Letter of Credit"). The
Australian Term Loan Letter of Credit shall expressly provide that such
Letter of Credit may only be drawn upon (x) in the event of a default in
the payment of principal or interest under the Australian Term Loan
Facility or (y) upon the occurrence of an event described in Section
8.01(p) or (q) with respect to KAP in the lesser of the amount of principal
and interest then due to the Australian Term Loan Facing Bank or the Letter
of Credit Undrawn Availability of the Australian Term Loan Letter of
Credit. The stated amount with respect to, and the Letter of Credit
Undrawn Availability of, the Australian Term Loan Letter of Credit shall be
automatically and permanently reduced, and the Revolving Credit Committed
Amount of each Bank shall be Pro Rata automatically and permanently
reduced, by the U.S. Dollar Equivalent of each A$ denominated amount
received by the Australian Term Loan Facing Bank in respect of any
repayment, prepayment or Scheduled Amortization Payment applied to
borrowings under the Australian Term Loan Facility. The Australian Term
Loan Letter of Credit shall (a) be for the purpose of providing credit
support for the Australian Term Loan Facility, (b) be in favor of the
Australian Term Loan Facing Bank, (c) be denominated in Australian Dollars;
and (d) have an expiration date no later than six years after its date of
issuance.
(ii) Australian Revolving Loan Letter of Credit. On the Closing
------------------------------------------
Date the Australian LC Issuing Bank will issue to the Australian Revolving
Loan Facing Bank for the account of the Borrower an A$ denominated Letter
of Credit with an initial
<PAGE>
-57-
Letter of Credit Undrawn Availability equal to the Australian Dollar
Equivalent of $10,000,000 substantially in the Form of Exhibit I-2 hereto
(the "Australian Revolving Loan Letter of Credit"). The Australian
Revolving Loan Letter of Credit shall expressly provide that such Letter of
Credit may only be drawn upon (x) in the event of a default in the payment
of principal or interest under the Australian Revolving Loan Facility or
(y) upon the occurrence of an event described in Section 8.01(p) or (q)
with respect to KAP in the lesser of the amount of principal and interest
then due to the Australian Revolving Loan Facing Bank or the Letter of
Credit Undrawn Availability of the Australian Revolving Loan Letter of
Credit. The stated amount with respect to, and the Letter of Credit Undrawn
Availability of, the Australian Revolving Loan Letter of Credit may be
permanently reduced by the Borrower as provided in the Australian Revolving
Loan Facility, in which case the Revolving Credit Committed Amount of each
Bank shall be Pro Rata automatically and permanently reduced by the U.S.
Dollar Equivalent of the A$ denominated amount of such reduction. The
Australian Revolving Loan Letter of Credit shall (a) be for the purpose of
providing credit support for the Australian Revolving Loan Facility, (b) be
in favor of the Australian Revolving Loan Facing Bank, (c) be denominated
in Australian Dollars; and (d) have an expiration date no later than six
years after its date of issuance.
3.02. Letter of Credit Fees.
---------------------
(a) Commissions. (i) The Borrower shall pay to the Administrative
-----------
Agent with respect to each trade Letter of Credit, for the accounts of the
several Banks in proportion to their respective Revolving Credit Proportions, a
Letter of Credit commission on the stated amount of each such Letter of Credit
in an amount equal to 50 basis points of such stated amount. The commission
applicable to each such Letter of Credit shall be payable on the date of
issuance of each such Letter of Credit.
(ii) The Borrower shall pay to the Administrative Agent with respect to
each standby Letter of Credit and the Australian Term Loan Letter of Credit, for
the accounts of the several Banks in proportion to their respective Revolving
Credit proportions, a Letter of Credit commission on the average daily Letter of
Credit Undrawn Availability equal to the Applicable Margin then applicable (or
which then would be applicable) to Revolving Credit Loans outstanding and
bearing interest at the Euro-Rate Option (whether or not any such Loans shall
then be outstanding or bearing interest by reference to such Option). The
commission applicable to each such Letter of Credit shall be payable quarterly
in arrears on the last day of each March 31, June 30, September 30 and December
31 while each such Letter of Credit is outstanding, on the date of any drawing
thereunder and on the date of the expiration and termination thereof, in each
case for the preceding period for which such commission has not been paid.
<PAGE>
-58-
(iii) The Borrower shall pay to the Administrative Agent with respect
to the Australian Revolving Loan Letter of Credit, for the accounts of the
several Banks in proportion to their respective Revolving Credit Proportions, an
Australian Revolving Loan Letter of Credit commission, on the average daily U.S.
Dollar Equivalent amount of borrowings under the Australian Revolving Loan
Facility plus the U.S. Dollar Equivalent amount of the Australian Revolving Loan
Interest Reserve, equal to the Applicable Margin then applicable (or which then
would be applicable) to Revolving Credit Loans outstanding and bearing interest
at the Euro-Rate Option (whether or not any such Loans shall then be outstanding
or bearing interest by reference to such Option). The commission applicable to
the Australian Revolving Loan Letter of Credit shall be payable quarterly in
arrears on the last day of each March 31, June 30, September 30 and December 31
while the Australian Revolving Loan Letter of Credit is outstanding, on the date
of any drawing thereunder and on the date of the expiration and termination
thereof, in each case for the preceding period for which such commission has not
been paid.
(b) Facing Fee; Administration Fees. The Borrower shall pay directly
-------------------------------
to each respective Issuing Bank (A) with respect to each outstanding Standby or
Trade Letter of Credit, to and for the sole account of the Standby and Trade LC
Issuing Bank, and (B) with respect to the Australian Term Loan Letter of Credit
and the Australian Revolving Loan Letter of Credit, to and for sole account of
the Australian LC Issuing Bank, a Letter of Credit facing fee calculated at the
rate of 25 basis points per annum on the aggregate Letter of Credit Undrawn
Availability of such of the foregoing Letters of Credit issued by the respective
Issuing Bank, in the case of standby Letters of Credit, the Australian Term Loan
Letter of Credit and the Australian Revolving Loan Letter of Credit, or
aggregate stated amount, if applicable, in the case of trade Letters of Credit;
in each case payable quarterly in arrears on the last day of each March 31, June
30, September 30 and December 31 while each Letter of Credit is outstanding, on
the date of any drawing thereunder and on the date of the expiration or
termination thereof, in each case for the preceding period for which such facing
fee has not been paid. In addition, the Borrower shall pay directly to each
respective Issuing Bank, for the sole account of such Issuing Bank, such other
issuance, administration, maintenance, amendment, drawing and negotiation fees
as may be customarily charged by such Issuing Bank from time to time in
connection with letters of credit issued by it.
3.03. Procedure for Issuance and Amendment of
Letters of Credit.
------------------------------------------
(a) Procedure for Issuance. The Borrower may from time to time
----------------------
request the Standby and Trade LC Issuing Bank to issue a Standby or Trade Letter
of Credit by delivering to the Standby and Trade LC Issuing Bank at such
location as the Standby and Trade LC Issuing Bank may from time to time
designate, with a copy to the Administrative Agent, at least three (3) Business
Days prior to the proposed Standby or Trade Letter of
<PAGE>
-59-
Credit issuance date (or on such shorter notice as the Standby and Trade LC
Issuing Bank may approve in its discretion), an application, in such form as may
from time to time be approved by the Standby and Trade LC Issuing Bank (the
"Letter of Credit Application"), completed to the satisfaction of the Standby
and Trade LC Issuing Bank, together with such other certificates, documents and
other papers and information as the Standby and Trade LC Issuing Bank may
reasonably request. Upon receipt of any Letter of Credit Application, the
Standby and Trade LC Issuing Bank will process such Letter of Credit
Application, and the other certificates, documents and other papers and
information delivered to it in connection therewith, in accordance with its
customary procedures and, unless it has been notified by the Administrative
Agent by the Standby and Trade LC Issuing Bank's close of business on the
Business Day preceding the proposed Standby or Trade Letter of Credit issuance
date that any condition thereto has not been satisfied, issue such Standby or
Trade Letter of Credit by delivering the original thereof to the beneficiary and
furnishing a copy thereof to the Borrower and the Administrative Agent (and the
Administrative Agent shall upon request promptly furnish copies thereof to the
Banks).
(b) Extension and Increase. (i) The Borrower may from time to time
----------------------
request the Standby and Trade LC Issuing Bank to extend the expiration date of
an outstanding Standby or Trade Letter of Credit or increase the Letter of
Credit Undrawn Availability thereunder. Such extension or increase shall for
all purposes hereof (including Section 5.02) be treated as though the Borrower
had requested issuance of a new Standby or Trade Letter of Credit pursuant to
Section 3.03(a); provided that the Standby or Trade LC Issuing Bank may, if it
so elects, issue an amendment to the particular Standby or Trade Letter of
Credit in question providing for such extension or increase in lieu of issuing a
new Standby or Trade Letter of Credit in substitution for the outstanding
Standby or Trade Letter of Credit.
(ii) The Borrower may request the Australian LC Issuing Bank to
increase the Letter of Credit Undrawn Availability of the Australian Revolving
Loan Letter of Credit by the Australian Dollar Equivalent of $10,000,000 on the
date of any such increase. Such increase shall for all purposes hereof
(including Section 5.02) be treated as though the Borrower had requested the
issuance of a new Letter of Credit. The Australian LC Issuing Bank may, if it so
elects, issue an amendment to the Australian Revolving Loan Letter of Credit
providing for such increase in lieu of issuing a new Australian Revolving Loan
Letter of Credit in substitution for the outstanding Australian Revolving Loan
Letter of Credit.
At least three (3) Business Days prior to the date upon which the
Borrower shall desire to increase the Letter of Credit Undrawn Availability of
the Australian Revolving Loan Letter of Credit, the Borrower shall deliver to
the Australian LC Issuing Bank at such location as the Australian LC Issuing
Bank may from time to time designate, with a copy to the Administrative Agent,
an application, in such form as may from time to time be approved by the
Australian LC Issuing Bank, completed to the satisfaction of the Australian
<PAGE>
-60-
LC Issuing Bank, together with such other certificates, documents and other
papers and information as the Australian LC Issuing Bank may reasonably request.
Upon receipt of the aforementioned application, the Australian LC Issuing Bank
will process such application, and the other certificates, documents and other
papers and information delivered to it in connection therewith, in accordance
with its customary procedures and, unless it has been notified by the
Administrative Agent by the Australian LC Issuing Bank's close of business on
the Business Day preceding the proposed increase in the Letter of Credit Undrawn
Availability of the Australian Revolving Loan Letter of Credit that any
condition thereto has not been satisfied, increase the Letter of Credit Undrawn
Availability of the Australian Revolving Loan Letter of Credit consistent with
the Borrower's request by either issuing an amendment to the Australian
Revolving Loan Letter of Credit providing for such increase or by issuing a new
Australian Revolving Loan Letter of Credit in substitution for the outstanding
Australian Revolving Loan Letter of Credit, delivering the original amendment or
new Australian Revolving Loan Letter of Credit, as the case may be, to the
beneficiary and furnishing a copy thereof to the Borrower and the Administrative
Agent (and the Administrative Agent shall upon request promptly furnish copies
thereof to the Banks).
(c) Limitations on Issuance and Extension. (i) As between the
-------------------------------------
Borrower and the Standby and Trade LC Issuing Bank, the issuance or extension of
any Standby or Trade Letter of Credit (including any deemed issuance pursuant to
Section 3.10 or arising from any increase or extension of any outstanding
Standby or Trade Letter of Credit pursuant to Section 3.03(b)) is within the
reasonable discretion of the Standby and Trade LC Issuing Bank.
(ii) As between the Standby and Trade LC Issuing Bank and the other
Bank Parties, the Standby and Trade LC Issuing Bank shall be justified and fully
protected in issuing any Standby or Trade Letter of Credit (including any deemed
issuance pursuant to Section 3.10 or arising from any increase or extension of
any outstanding Standby or Trade Letter of Credit pursuant to Section 3.03(b))
absent notice from the Administrative Agent as provided in Section 3.03(a), in
each case notwithstanding any subsequent notices to the Standby and Trade LC
Issuing Bank, any knowledge of an Event of Default or Potential Default, any
knowledge of failure of any condition specified in Section 5.02 to be satisfied,
any other knowledge of the Standby and Trade LC Issuing Bank, or any other
event, condition or circumstance whatsoever.
(iii) As between the Administrative Agent and the Banks, the
Administrative Agent shall have no obligation to direct the Standby and Trade LC
Issuing Bank pursuant to Section 3.03(a) not to issue any Standby or Trade
Letter of Credit unless the Administrative Agent shall have received from the
Required Banks, at least two (2) Business Days before the date of such proposed
issuance, an unrevoked written notice that any condition precedent set forth in
Section 5.02 will not be satisfied on such date and expressly requesting that
the
<PAGE>
-61-
Administrative Agent direct the Standby and Trade LC Issuing Bank not to issue
such Standby or Trade Letter of Credit. Unless the Administrative Agent has
received such notice, the Administrative Agent shall be justified and fully
protected, as against the Banks, in failing to direct the Standby and Trade LC
Issuing Bank not to issue such Standby or Trade Letter of Credit,
notwithstanding any subsequent notices to the Administrative Agent, any
knowledge of an Event of Default or Potential Default, any knowledge of failure
of any condition specified in Section 5.02 to be satisfied, any other knowledge
of the Administrative Agent, or any other event, condition or circumstance
whatsoever.
(d) Amendments. At the request of the Borrower from time to time, and
----------
subject to satisfaction of such conditions as an Issuing Bank may require, such
Issuing Bank may amend, modify or supplement Letters of Credit, or waive
compliance with any condition of issuance or payment, without the consent of,
and without liability to, the Administrative Agent or any Bank; provided that,
notwithstanding the foregoing, an Issuing Bank shall not issue any Letter of
Credit as to which it has received a notice from the Administrative Agent as
contemplated by Section 3.03(a); and provided, further, that any amendment,
modification or supplement that extends the expiration date or increases the
amount available to be drawn under any outstanding Standby or Trade Letter of
Credit shall be subject to Section 3.03(b).
3.04. Letter of Credit Participating Interests.
----------------------------------------
In the case of each Letter of Credit, effective as of the date of the
issuance thereof (including any deemed issuance pursuant to Section 3.10 or
arising from any increase or extension of any outstanding Letter of Credit
pursuant to Section 3.03(b)), each Issuing Bank automatically shall be deemed,
irrevocably and unconditionally, to have sold, assigned, transferred and
conveyed to each Bank, and each Bank automatically shall be deemed, irrevocably
and unconditionally, to have purchased, acquired, accepted and assumed from each
Issuing Bank, without recourse to, or representation or warranty by, any such
Issuing Bank, an undivided interest in a proportion equal to such Bank's
Revolving Credit Proportion, in all of such Issuing Bank's rights and
obligations in, to or under such Letter of Credit, the related Letter of Credit
Reimbursement Obligations and all collateral, guarantees and other rights from
time to time directly or indirectly securing the foregoing (such interest of
each Bank being referred to herein as a "Letter of Credit Participating
Interest"). Other than Letter of Credit Reimbursement Obligations and Letter of
Credit commissions, amounts payable pursuant to Section 3.02(a) from time to
time under or in connection with a Letter of Credit shall be for the sole
account of the Issuing Bank issuing such Letter of Credit. On the date that any
Purchasing Bank becomes a party to this Agreement in accordance with Section
10.12, Letter of Credit Participating Interests in any outstanding Letters of
Credit held by the Bank from which such Purchasing Bank acquired its interest
hereunder shall be proportionately reallotted between such Purchasing Bank and
such transferor Bank (and, to the extent such transferor Bank is the Issuing
Bank, the Purchasing Bank shall be deemed to
<PAGE>
-62-
have acquired a Letter of Credit Participating Interest from such transferor
Bank to such extent). Except as contemplated by the immediately preceding
sentence, neither the Letter of Credit Participating Interest of any Bank
hereunder nor its obligations under this Article III may be assigned or
transferred without the written consent of the Issuing Bank of the underlying
Letter or Letters of Credit. Each Bank hereby expressly and unconditionally
agrees that its obligation to participate in each Letter of Credit issued
hereunder and its obligation to make the payments specified in Section 3.05
shall be absolute, irrevocable and unconditional, and shall not be affected by
any event, condition or circumstance whatsoever. The failure of any Bank to make
any such payment shall not relieve any Bank of its funding obligation hereunder
on the date due, but no Bank shall be responsible for the failure of any other
Bank to meet its funding obligations hereunder.
3.05. Payments.
--------
(a) Reimbursement of Issuing Banks. The Borrower agrees (i) to
------------------------------
reimburse each Issuing Bank, forthwith upon its demand, by making payment to the
Administrative Agent for the account of such Issuing Bank in accordance with
Section 2.10, on the date and in the amount of each payment made by such Issuing
Bank under any Letter of Credit, without notice, protest or demand, all of which
are expressly waived, and a cause of action therefor shall immediately accrue,
and (ii) to pay to the Administrative Agent for the account of such Issuing Bank
interest on any Letter of Credit Unreimbursed Draw for each day from the date of
such payment until demand at a fluctuating rate per annum equal to the then
current Base Rate Option applicable to Revolving Credit Loans and from the date
of demand until reimbursement in full thereof (before and after judgment) at a
fluctuating rate per annum equal to 2% above the then current Base Rate Option
applicable to Revolving Credit Loans, in each case such interest to change
automatically from time to time effective as of the effective date of each
change in the Base Rate.
(b) Agreement of Banks. In the event that an Issuing Bank makes a
------------------
payment under any Letter of Credit and is not reimbursed in full therefor
forthwith upon demand of such Issuing Bank (or if any reimbursed amount is
required to be returned by such Issuing Bank), such Issuing Bank shall promptly
notify the Administrative Agent thereof (which notice may be by telephone), and
the Administrative Agent shall forthwith notify each Bank (which notice may be
by telephone promptly confirmed in writing) thereof. No later than the
Administrative Agent's close of business at its Office on the date such notice
is given, each such Bank will pay to the Administrative Agent, for the account
of such Issuing Bank, in immediately available funds, an amount equal to such
Bank's Pro Rata share of the respective Letter of Credit Unreimbursed Draw. If
and to the extent that any Bank fails to make such payment to the Administrative
Agent for the account of such Issuing Bank on such date, such Bank shall pay
such amount, on demand, together with interest, for such Issuing Bank's account,
for each day from and including the date of such Issuing Bank's payment to
<PAGE>
-63-
and including the date of payment to such Issuing Bank (before and after
judgment) at the following rates per annum: (i) for each day from and including
the date of such payment by such Issuing Bank to and including the second
Business Day thereafter, at the Federal Funds Effective Rate for such day, and
(ii) for each day thereafter, at the rate applicable to Letter of Credit
Unreimbursed Draws under Section 3.05(a) for such day.
(c) Receipt of Payment. Whenever, at any time, after an Issuing Bank
------------------
has made payment under a Letter of Credit and has received from any Bank such
Bank's Pro Rata share of the Letter of Credit Unreimbursed Draw with respect
thereto, such Issuing Bank receives any payment or makes any application of
funds on account of such Letter of Credit Unreimbursed Draw, such Issuing Bank
will pay to the Administrative Agent, for the account of such Bank, such Bank's
Pro Rata share of such payment or application.
(d) Rescission. If any amount received by an Issuing Bank on account
----------
of any Letter of Credit Reimbursement Obligation shall be avoided, rescinded or
otherwise returned or paid over by such Issuing Bank for any reason at any time,
whether before or after the termination of this Agreement (or such Issuing Bank
believes in good faith that such avoidance, rescission, return or payment is
required, whether or not such matter has been adjudicated), each Bank will,
promptly upon notice from the Administrative Agent or such Issuing Bank, pay
over to the Administrative Agent, for the account of such Issuing Bank, such
Bank's Pro Rata share of such amount (to the extent such amount was therefore
paid to such Bank hereunder), together with its Pro Rata share of any interest
or penalties payable with respect thereto.
(e) Equalization. If any Bank receives any payment or makes any
------------
application on account of its Letter of Credit Participating Interest in a
Letter of Credit, such Bank shall forthwith pay over to the Issuing Bank of such
Letter of Credit in Dollars and in like kind of funds received or applied by it
the amount in excess of such Bank's ratable share of the amount so received or
applied.
3.06. Further Assurances.
------------------
The Borrower hereby agrees from time to time to do and perform any and
all acts and to execute any and all other or further instruments reasonably
requested by each Issuing Bank more fully to effect the purposes of this
Agreement and the issuance of the Letters of Credit hereunder.
3.07. Obligations Absolute.
--------------------
<PAGE>
-64-
The payment obligations of the Borrower under Section 3.05 shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including the following
circumstances:
(a) any lack of validity or enforceability of this Agreement, any
Letter of Credit, any other Related Document or any other documents,
instruments or agreements evidencing or otherwise relating to any
obligation of the Borrower secured or supported by any Letter of Credit;
(b) the existence of any claim, set-off, defense or other right which
the Borrower or any other person may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any persons for
whom any such beneficiary or any such transferee may be acting), the
Issuing Bank of such Letter of Credit or any other Bank Party, or any other
person, whether in connection with this Agreement, the transactions
contemplated hereby or any unrelated transaction;
(c) any draft, certificate, statement or other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect, or any statement therein being untrue or
inaccurate in any respect;
(d) payment by an Issuing Bank under any Letter of Credit issued by
such Issuing Bank against presentation of a draft or certificate which does
not comply with the terms of such Letter of Credit, or payment by an
Issuing Bank under any Letter of Credit issued by such Issuing Bank in any
other circumstances in which any condition to payment is not met, except
payment resulting solely from the gross negligence or willful misconduct of
any such Issuing Bank, as finally determined by a court of competent
jurisdiction; or
(e) any other event, condition, circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
3.08. Certain Provisions Relating to the Issuing Banks;
Additional Provisions Regarding Letters of Credit.
-------------------------------------------------
(a) General. The Issuing Banks shall have no duties or
-------
responsibilities except those expressly set forth in this Agreement and the
Related Documents, and no implied duties or responsibilities on the part of any
Issuing Bank shall be read into this Agreement or any Related Document or shall
otherwise exist. The duties and responsibilities of the Issuing Banks to the
other Bank Parties under this Agreement and the Related Documents shall be
mechanical and administrative in nature, and the Issuing Banks shall not have a
fiduciary relationship in respect of any Bank Party or any other person. No
Issuing Bank shall be
<PAGE>
-65-
liable for any action taken or omitted to be taken by it under or in connection
with this Agreement or any Related Document, unless caused by its own gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction. No Issuing Bank shall be under any obligation to ascertain,
inquire or give any notice relating to (i) the performance or observance of any
of the terms or conditions of this Agreement or any Related Document, (ii) the
business, operations, condition (financial or otherwise) or prospects of the
Borrower or any other person, or (iii) the existence of any Event of Default or
Potential Default. No Issuing Bank shall be under any obligation, either
initially or on a continuing basis, to provide any person with any notices,
reports or information of any nature, whether in its possession presently or
hereafter, except for such notices, reports and other information as expressly
required by this Agreement to be so furnished.
(b) Administration. The Issuing Banks may rely upon any notice or
--------------
other communication of any nature (written or oral, whether or not such notice
or other communication is made in a manner permitted or required by this
Agreement or any Related Document) purportedly made by or on behalf of the
proper party or parties, and no Issuing Bank shall have any duty to verify the
identity or authority of any person giving such notice or other communication.
An Issuing Bank may consult with legal counsel (including in-house counsel for
any such Issuing Bank or in-house or other counsel for the Borrower),
independent public accountants and any other experts selected by it from time to
time, and any such Issuing Bank shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts. Whenever an Issuing Bank shall deem it
necessary or desirable that a matter be proved or established with respect to
the Borrower or any other Bank Party, such matter may be established by a
certificate of the Borrower or such other Bank Party, as the case may be, and
such Issuing Bank may be conclusively rely upon such certificate.
(c) Indemnification of Issuing Bank. The Borrower hereby indemnifies
-------------------------------
and holds each Issuing Bank harmless from and against any and all claims,
damages, losses, liabilities, costs, expenses, actions, judgments and suits of
any kind or nature whatsoever (including reasonable attorneys' fees and
expenses) (collectively "Claims") that may at any time be imposed on, incurred
by or asserted against such Issuing Bank in its capacity as such as a result of,
or arising out of, or in any way relating to or by reason of or in connection
with this Agreement or any Related Document, any transaction contemplated hereby
or thereby, or any transaction secured or financed, in whole or in part,
directly or indirectly, with any Letter of Credit or the proceeds thereof,
except to the extent, but only to the extent, any such Claims are caused by such
Issuing Bank's gross negligence or willful misconduct, as finally determined by
a court of competent jurisdiction. Each Bank agrees to reimburse and indemnify
each Issuing Bank for and against any and all Claims required to be reimbursed
by the Borrower pursuant to the immediately preceding sentence but not so
reimbursed.
<PAGE>
-66-
3.09. Cash Collateral for Letters of Credit.
-------------------------------------
(a) Letter of Credit Collateral Account. If required, the Collateral
-----------------------------------
Agent shall maintain in its own name at its Office a deposit account (the
"Letter of Credit Collateral Account"), which shall bear interest (added to the
deposit balance) in accordance with the Collateral Agent's ordinary practices
for deposit accounts of like size and nature, over which the Collateral Agent
shall have sole dominion and control, and the Borrower shall have no right to
withdraw any funds deposited therein. The Collateral Agent shall deposit into
the Letter of Credit Collateral Account such funds as this Agreement or any
Related Document requires to be paid therein. As security for the payment of
all Obligations, the Borrower hereby grants, conveys, assigns, pledges,
transfers to the Collateral Agent, and creates in the Collateral Agent's favor,
a continuing Lien on and security interest in, the Letter of Credit Collateral
Account, all amounts from time to time on deposit therein, all proceeds of the
conversion, voluntary or involuntary, thereof into cash, instruments, securities
or other property, and all other proceeds thereof. The Borrower hereby
represents, warrants, covenants and agrees that such Lien shall at all times be
valid and perfected, prior to all other Liens, and the Borrower shall take or
cause to be taken all such actions and execute and deliver all such instruments
and documents as may be necessary or, in the Collateral Agent's reasonable
judgment, desirable to perfect or protect such Lien. The Borrower shall not
create or suffer to exist any Lien on any amount or investment held in the
Letter of Credit Collateral Account other than the Lien in favor of the
Collateral Agent granted under this Section.
(b) Cash Collateral for Letter of Credit Exposure in Certain
--------------------------------------------------------
Circumstances. To the extent that this Agreement or any Related Document
- -------------
requires a payment, prepayment or other application of funds to be made with
respect to the Revolving Credit Loans or Swingline Loans, such provision shall
be construed as follows: after payment in full by the Borrower of the
outstanding Swingline Loans, the outstanding Revolving Credit Loans, and the
outstanding Letter of Credit Unreimbursed Draws, then, to the extent of the
excess, if any, of the aggregate Letter of Credit Exposure at such time over the
balance in the Letter of Credit Collateral Account, an amount equal to
the remainder of the amount so required to be paid by the Borrower shall
immediately be paid by the Borrower to the Collateral Agent for deposit in the
Letter of Credit Collateral Account. In addition, the Borrower agrees that,
without limitation of the foregoing or of any other provisions of this Agreement
or the Related Documents requiring collateral for the Letters of Credit or other
Obligations in whole or in part, and without limitation of other rights or
remedies under this Agreement or the Related Documents or at law or in equity,
if all the Revolving Credit Loans become due and payable pursuant to Section
8.02 hereof, the Borrower shall immediately pay to the Collateral Agent, for
deposit in the Letter of Credit Collateral Account, an amount equal to
<PAGE>
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the excess, if any, of the aggregate Letter of Credit Exposure at such time over
the balance in the Letter of Credit Collateral Account.
(c) Application of Funds. The Collateral Agent shall apply funds in
--------------------
the Letter of Credit Collateral Account: (i) on account of Letter of Credit
Reimbursement Obligations as and when the same become due and payable if and to
the extent that the Borrower fails directly to pay the same, and (ii) if no
Letter of Credit Reimbursement Obligations are due and payable, no Letters of
Credit are outstanding and the balance of the Letter of Credit Collateral
Account exceeds the aggregate Letter of Credit Exposure, the excess shall be
applied on account of the other Obligations. If all Obligations (other than
Obligations constituting contingent obligations under indemnification provisions
which survive indefinitely, so long as no unsatisfied claim has been made under
any such indemnification provision) have been indefeasibly paid in full in cash,
all Commitments have terminated and all Letters of Credit have expired, promptly
following demand by the Borrower, the Collateral Agent shall release to the
Borrower all remaining funds in the Letter of Credit Collateral Account.
(d) Survival of Provisions. The provisions of this Section 3.09 shall
----------------------
continue in full force and effect from and after the date hereof until the
obligation of each Issuing Bank to issue Letters of Credit has expired or has
been terminated, all Letters of Credit have expired or have been terminated and
all Letter of Credit Reimbursement Obligations have been indefeasibly paid in
full in cash.
3.10. Certain Letters of Credit Outstanding as of Closing Date.
--------------------------------------------------------
Notwithstanding anything to the contrary set forth herein, the Borrower
shall be deemed to have requested the Standby and Trade LC Issuing Bank to issue
on the Closing Date, and the Standby and Trade LC Issuing Bank shall be deemed
to have issued on such date, the letters of credit set forth on Schedule 3.10,
without further action on the part of the Borrower or the Standby and Trade LC
Issuing Bank (and, without limitation of the foregoing, the Borrower shall not
be required to pay any commission pursuant to Section 3.02(a) or any issuance
fee pursuant to Section 3.02(b) in connection with any such deemed issuance).
From and after such deemed issuance, all such letters of credit shall be deemed
to be Standby or Trade Letters of Credit issued and outstanding hereunder for
all purposes hereof.
3.11. The Swingline Subfacility.
-------------------------
(a) General. Subject to the terms and conditions of this Agreement,
-------
and relying upon the representations and warranties herein set forth and the
upon the agreements
<PAGE>
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of the Banks set forth in Section 3.13 hereof, the Swingline Bank may in its
discretion make loans (the "Swingline Loans") to the Borrower at any time or
from time to time on or after the date hereof and to but not including the
Revolving Credit Expiration Date. The Swingline Bank shall not make any
Swingline Loan to the extent that the aggregate amount of Swingline Loans
outstanding would exceed $10,000,000 (the "Swingline Subfacility Amount"). The
Swingline Bank shall not make any Swingline Loan to the extent that the
aggregate amount of Swingline Loans outstanding would exceed the Swingline
Current Availability most recently notified to it, as more fully provided in
Section 3.12(a) hereof.
(b) Nature of Credit. Within the limits of time and amount set forth
----------------
in this Section 3.11, and subject to the provisions of this Agreement, and so
long as the Swingline Bank is willing in its discretion to make Swingline Loans,
the Borrower may borrow, repay and reborrow Swingline Loans hereunder.
(c) Swingline Note. The obligation of the Borrower to repay the
--------------
unpaid, principal amount of the Swingline Loans made to it by the Swingline Bank
and to pay interest thereon shall be evidenced in part by a promissory note of
the Borrower to the Swingline Bank, dated the Closing Date (the "Swingline
Note") in substantially the form attached hereto as Exhibit B, with the blanks
appropriately filled, payable to the order of the Swingline Bank in a face
amount equal to the Swingline Subfacility Amount.
(d) Maturity. To the extent not due and payable earlier, the
--------
Swingline Loans shall be due and payable on the Revolving Credit Expiration
Date.
(e) Making of Swingline Loans, etc. The Borrower may request
------------------------------
Swingline Loans to be made in accordance with the provisions of Section 2.04
hereof, except that (x) the Administrative Agent need not notify other Banks of
such request, and (y) Swingline Loans may be requested and made in any amount of
not less than $250,000 (subject to the overall limits of amount set forth in
this Section 3.11).
(f) Repayment of Swingline Loans, etc. Without limitation of any
---------------------------------
other provision hereof, the Swingline Bank may in its discretion and with prior
notice to the Borrower elect to apply to repayment of Swingline Loans any
amounts on deposit from time to time in accounts maintained with it by or for
the benefit of the Borrower. The Borrower may, in the alternative, prepay
Swingline Loans in accordance with the provisions of Section 2.08 hereof, except
that the Borrower need give notice only to the Administrative Agent and the
Swingline Bank and the Administrative Agent need not notify other Banks of such
request.
<PAGE>
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3.12. Limitations on the Making of Swingline Loans.
--------------------------------------------
(a) Swingline Current Availability. The Administrative Agent shall
------------------------------
calculate the Swingline Current Availability each time there is a change in the
aggregate outstanding principal amount of the Revolving Credit Loans, the
aggregate Letter of Credit Exposure or the Revolving Credit Committed Amounts.
The "Swingline Current Availability" at any time shall be equal to the lesser of
(i) the Swingline Subfacility Amount, or
(ii) the amount equal to (A) the sum of the Revolving Credit
Committed Amounts of the Banks at such time, minus (B) the sum of the
aggregate principal amount of Revolving Credit Loans and the aggregate
Letter of Credit Exposure at such time.
Each time the Swingline Current Availability changes, the Administrative Agent
shall promptly notify the Swingline Bank (by telephone promptly confirmed in
writing) of such fact, stating the new Swingline Current Availability. From and
after the second Business Day after receiving such notice from the
Administrative Agent, the Swingline Bank shall not make any Swingline Loan to
the extent that the aggregate principal amount of Swingline Loans would exceed
the Swingline Current Availability so notified to the Swingline Bank.
(b) Rights of the Parties. As between the Borrower, on the one hand,
---------------------
and the Swingline Bank and the other Bank Parties, on the other hand, the making
of any Swingline Loan is within the discretion of the Swingline Bank. As
between the Swingline Bank, on the one hand, and the other Bank Parties, on the
other hand, the Swingline Bank shall not make any Swingline Loan outside the
limitations of time and amount set forth in Section 3.11 hereof, and shall not
make any Swingline Loan if the Swingline Bank shall have received, at least two
Business Days before making such Swingline Loan, from the Required Banks an
unrevoked written notice that any condition precedent set forth in Section 5.02
will not be satisfied and expressly requesting that the Swingline Bank cease to
make Swingline Loans. Absent such notice, the Swingline Bank shall be justified
and fully protected, as against the Administrative Agent and the Banks, in
making Swingline Loans, notwithstanding any knowledge of an Event of Default or
Potential Default, any knowledge of failure of any condition specified in
Section 5.02 hereof to be satisfied, any other knowledge of the Swingline Bank,
or any other event, condition or circumstance whatever.
<PAGE>
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3.13. Swingline Loan Participating Interests.
--------------------------------------
(a) Generally. At the discretion of the Swingline Bank at any time,
---------
on one Business Day's notice to each Bank, the Swingline Bank may require each
other Bank to purchase, acquire, accept and assume from the Swingline Bank,
without recourse to, or representation or warranty by, the Swingline Bank, an
undivided interest, in a proportion equal to such Bank's Pro Rata share, in all
of the Swingline Bank's rights and obligations in, to or under the outstanding
Swingline Loans, together with accrued and unpaid interest thereon, and all
collateral, guarantees and other rights from time to time directly or indirectly
securing the foregoing (such interest of each Bank being referred to herein as a
"Swingline Loan Participating Interest"). On the date that any Purchasing Bank
becomes a party to this Agreement in accordance with Section 10.12 hereof,
Swingline Loan Participating Interests in any outstanding Swingline Loans held
by the Bank from which such Purchasing Bank acquired its interest hereunder
shall be proportionately reallotted between such Purchasing Bank and such
transferor Bank.
(b) Obligations Absolute. Notwithstanding any other provision hereof,
--------------------
each Bank hereby agrees that its obligation to participate in each Swingline
Loan issued in accordance herewith, and its obligation to make the payments
specified in Section 3.05 hereof, are each absolute, irrevocable and
unconditional and shall not be affected by any event, condition or circumstance
whatever. The failure of any Bank to make any such payment shall not relieve
any other Bank of its funding obligation hereunder on the date due, but no Bank
shall be responsible for the failure of any other Bank to meet its funding
obligations hereunder.
(c) Payment by Banks on Account of Swingline Loans. If the Swingline
----------------------------------------------
Bank desires to sell Swingline Loan Participants Interests to the Banks, the
Swingline Bank will promptly notify the Administrative Agent thereof (which
notice may be by telephone), and the Administrative Agent shall forthwith notify
each Bank (which notice may be by telephone promptly confirmed in writing)
thereof. No later than the Administrative Agent's close of business on the date
such notice is given by the Administrative Agent, each such Bank will pay to the
Administrative Agent, for the account of the Swingline Bank, in immediately
available funds, an amount equal to such Bank's Pro Rata share of the
outstanding principal amount of the Swingline Loans and accrued and unpaid
interest thereon. If and to the extent that any Bank fails to make such payment
to the Swingline Bank on such date, such Bank shall pay such amount on demand,
together with interest, for the Swingline Bank's own account, for each day from
and including the date of the Swingline Bank's payment to and including the date
of repayment to the Swingline Bank (before and after judgment) at the following
rates per annum: (x) for each day from and including the date of such payment
by the Swingline Bank to and including the second Business Day thereafter, at
the Federal
<PAGE>
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Funds Effective Rate for such day, and (y) for each day thereafter, at the rate
applicable to the Swingline Loans for such day.
(d) Distributions to Participants. If, at any time, after the
-----------------------------
Swingline Bank has made a Swingline Loan and has received from any Bank such
Bank's share of such Swingline Loan, and the Swingline Bank receives any payment
or makes any application of funds on account of such Swingline Loan, the
Swingline Bank will pay to the Administrative Agent, for the account of such
Bank, such Bank's Pro Rata share of such payment.
(e) Rescission. If any amount received by the Swingline Bank on
----------
account of any Swingline Loan or interest thereon shall be avoided, rescinded or
otherwise returned or paid over by the Swingline Bank for any reason at any
time, whether before or after the termination of this Agreement (or the
Swingline Bank believes in good faith that such avoidance, rescission, return or
payment is required, whether or not such matter has been adjudicated), each such
Bank will, promptly upon notice from the Administrative Agent or the Swingline
Bank, pay over to the Administrative Agent for the account of the Swingline Bank
its Pro Rata share of such amount, together with its Pro Rata share of any
interest or penalties payable with respect thereto.
(f) Equalization. If any Bank receives any payment or makes any
------------
application on account of its Swingline Loan Participating Interest, such Bank
shall forthwith pay over to the Swingline Bank in Dollars and in like kind of
funds received or applied by it the amount in excess of such Bank's ratable
share of the amount so received or applied.
3.14. Certain Provisions Relating to the Swingline Bank.
-------------------------------------------------
(a) General. The Swingline Bank shall have no duties or
-------
responsibilities except those expressly set forth in this Agreement and the
Related Documents, and no implied duties or responsibilities on the part of the
Swingline Bank shall be read into this Agreement or any Related Document or
shall otherwise exist. The duties and responsibilities of the Swingline Bank to
the other Bank Parties under this Agreement and the Related Documents shall be
mechanical and administrative in nature, and the Swingline Bank shall not have a
fiduciary relationship in respect of any Bank Party or any other person. The
Swingline Bank shall not be liable for any action taken or omitted to be taken
by it under or in connection with this Agreement or any Related Document, unless
caused by its own gross negligence or willful misconduct, as finally determined
by a court of competent jurisdiction. The Swingline Bank shall not be under any
obligation to ascertain, inquire or give any notice relating to (i) the
performance or observance of any of the terms or conditions of this Agreement or
any Related Document, (ii) the business, operations, condition (financial or
otherwise) or prospects of the Borrower or any other person, or (iii) the
existence of any Event of Default or Potential Default. The Swingline Bank
shall not be under any
<PAGE>
-72-
obligation, either initially or on a continuing basis, to provide any person
with any notices, reports or information of any nature, whether in its
possession presently or hereafter, except for such notices, reports and other
information expressly required by this Agreement to be so furnished.
(b) Administration. The Swingline Bank may rely upon any notice or
--------------
other communication of any nature (written or oral, whether or not such notice
or other communication is made in a manner permitted or required by this
Agreement or any Related Document) purportedly made by or on behalf of the
proper party or parties, and the Swingline Bank shall not have any duty to
verify the identity or authority of any person giving such notice or other
communication. The Swingline Bank may consult with legal counsel (including
in-house counsel for the Swingline Bank or in-house or other counsel, for the
Borrower), independent public accountants and any other experts selected by it
from time to time, and the Swingline Bank shall not be liable for any action
taken or omitted to be taken in good faith in accordance with the advice of such
counsel, accountants or experts. Whenever the Swingline Bank shall deem it
necessary or desirable that a matter be proved or established with respect to
the Borrower or any Bank Party, such matter may be established by a certificate
of the Borrower or such other Bank Party, as the case may be, and the Swingline
Bank may conclusively rely upon such certificate.
(c) Indemnification of Swingline Bank. The Borrower hereby
---------------------------------
indemnifies and holds the Swingline Bank harmless from and against any and all
claims, damages, losses, liabilities, expenses, actions, judgments and suits of
any kind or nature whatsoever (including reasonable attorneys' fees and
expenses) ("Swingline Bank Claims") that may at any time be imposed on, incurred
by or asserted against the Swingline Bank in its capacity as such as a result
of, or arising out of, or in any way relating to or by reason of, this
Agreement, any Related Document, any transaction contemplated hereby or thereby,
or any transaction financed, in whole or in part, directly or indirectly, with
the proceeds of any Swingline Loan, except to the extent, but only to the
extent, any such Swingline Bank Claims are caused by the Swingline Bank's gross
negligence or willful misconduct, as finally determined by a court of competent
jurisdiction. Each Bank agrees to reimburse and indemnify the Swingline Bank
for and against any and all Swingline Bank Claims required to be reimbursed by
the Borrower pursuant to the immediately preceding sentence but not so
reimbursed.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Bank Parties that:
<PAGE>
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4.01. Organization and Qualification.
------------------------------
The Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries
(other than the Unrestricted Subsidiaries) are each corporations duly organized,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation. The Borrower, the Borrower's Subsidiaries, KAP
and KAP's Subsidiaries (other than the Unrestricted Subsidiaries) each has
corporate power and authority to own or lease its property and to transact the
business in which it is engaged or presently proposes to engage. Except as set
forth on Schedule 4.01, the Borrower, the Borrower's Subsidiaries, KAP and KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) are each duly qualified
to do business as a foreign corporation and in good standing in all
jurisdictions in which the ownership of their respective properties or the
nature of their respective activities or both makes such qualification
necessary, except to the extent that any failure to be so qualified does not
have or would not reasonably be expected to have, a Material Adverse Effect.
Schedule 4.01 states as of the date hereof the jurisdictions of incorporation of
the Borrower, each of the Borrower's Subsidiaries, KAP and each of KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) and the jurisdictions in
which the Borrower, each of the Borrower's Subsidiaries, KAP and each of KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) are each qualified to do
business as a foreign corporation.
4.02. Authority and Authorization.
---------------------------
The Borrower has full corporate power and authority to execute and
deliver this Agreement and the Related Documents to which it is a party, to make
the borrowings provided for herein and to perform its obligations hereunder and
thereunder, and all such action has been duly and validly authorized by all
necessary corporate proceedings on its part. Each Guarantor has full corporate
power and authority to execute and deliver the Related Documents to which it is
a party and to perform its obligations hereunder and thereunder, and all such
action has been duly and validly authorized by all necessary corporate
proceedings on its part.
4.03. Execution and Binding Effect.
----------------------------
This Agreement and the Related Documents to which the Borrower is a
party have been duly and validly executed and delivered by the Borrower and
constitute, and each other Related Document to which the Borrower hereafter may
be a party, when executed and delivered by the Borrower, will constitute, legal,
valid and binding obligations of the Borrower enforceable in accordance with the
terms hereof and thereof, except, in each case, as may be limited by bankruptcy,
insolvency or other similar laws of general application
<PAGE>
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affecting the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies. The Related Documents to
which each Guarantor is a party have been duly and validly executed and
delivered by such Guarantor and constitute, and each other Related Document to
which any Guarantor hereafter may be a party, when executed and delivered by
such Guarantor, will constitute, legal, valid and binding obligations of such
Guarantor enforceable in accordance with the terms hereof and thereof, except,
in each case, as may be limited by bankruptcy, insolvency or other similar laws
of general application affecting the enforcement of creditors' rights or by
general principles of equity limiting the availability of equitable remedies.
4.04. Authorizations and Filings.
--------------------------
Except as set forth on Schedule 4.04, as of the date hereof, no
authorization, consent, approval, license, exemption, authorization or
validation or other action by, and no registration, qualification, designation,
declaration, recording or filing with, any Official Body by the Borrower, the
Borrower's Subsidiaries, KAP or KAP's Subsidiaries (other than the Unrestricted
Subsidiaries) (collectively, "Official Authorizations") is or will be necessary
or advisable in connection with execution and delivery of this Agreement, the
Related Documents, consummation of the Transaction or the transactions herein or
therein contemplated, performance of or compliance with the terms and conditions
hereof or thereof or to ensure the legality, validity, enforceability or
admissibility in evidence hereof or thereof. Each Official Authorization
referred to on Schedule 4.04 has been duly obtained or made, as the case may be,
and is in full force and effect or, if so specified on Schedule 4.04, will be
either (a) obtained or made prior to, and will be in full force and effect on,
the Closing Date or (b) obtained or made as promptly as practicable following
the Closing Date. There is no action, suit, proceeding or investigation pending
or (to the Borrower's knowledge after due inquiry) threatened which seeks or may
result in the reversal, rescission, termination, modification or suspension of
any such Official Authorization.
4.05. Absence of Conflicts.
--------------------
Except as set forth on Schedule 4.05, neither the execution and
delivery of this Agreement or the Related Documents nor consummation of the
transactions herein or therein contemplated nor performance of or compliance
with the terms and conditions hereof or thereof will (a) violate or conflict
with any Law, (b) violate or conflict with or result in a breach of or a default
under (i) the articles of incorporation or bylaws (or other comparable
organizational documents) of the Borrower, any of the Borrower's Subsidiaries,
KAP or any of KAP's Subsidiaries (other than the Unrestricted Subsidiaries) or
(ii) any agreement or instrument to which the Borrower, any of the Borrower's
Subsidiaries, KAP or any of KAP's Subsidiaries (other than the Unrestricted
Subsidiaries) is a party or by which any of them or any of their respective
properties may be subject or bound, the consequences of which has,
<PAGE>
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or would reasonably be expected to have, a Material Adverse Effect, or to result
in any liability of any Bank Party, or (c) result in the creation or imposition
of any Lien upon any property of the Borrower, any of the Borrower's
Subsidiaries, KAP or any of KAP's Subsidiaries (other than the Unrestricted
Subsidiaries), except for any Lien created by or pursuant to the Security
Documents.
4.06. Financial Statements.
--------------------
(a) The Borrower has heretofore furnished or caused to be furnished to
the Banks audited financial statements of the Borrower and its Consolidated
Subsidiaries and of KAP and its Consolidated Subsidiaries (including the
Unrestricted Subsidiaries) for each of the three years in the period ended
December 31, 1996, and unaudited financial statements of the Borrower and its
Consolidated Subsidiaries and of KAP and its Consolidated Subsidiaries
(including the Unrestricted Subsidiaries) for the fiscal quarters ending March
31, 1997, June 30, 1997 and September 30, 1997, in each case including balance
sheets and the related statements of income. The Borrower has also heretofore
furnished or caused to be furnished to the Banks unaudited interim combined
(where available, and where not, uncombined) consolidated and consolidating
financial statements of the Borrower and KAP for each fiscal month and quarterly
period ended subsequent to June 30, 1997 as to which such financial statements
are available. Such financial statements present fairly the financial condition
of Borrower and its Consolidated Subsidiaries and KAP and its Consolidated
Subsidiaries (including the Unrestricted Subsidiaries) as of the end of such
periods and the results of its operations for such periods, all in conformity
with GAAP (or in the case of KAP and its Consolidated Subsidiaries (including
the Unrestricted Subsidiaries), in conformity with Australian generally accepted
accounting principals in effect at the date of this Agreement consistently
applied). Except as disclosed in the financial statements referred to herein or
on Schedule 4.06, as of the date hereof, both before and after giving effect to
the Transaction, none of the Borrower, its Subsidiaries, KAP or its Subsidiaries
has any contingent liabilities (including liabilities for taxes), unusual
forward or long-term commitments or unrealized or anticipated losses from
unfavorable commitments which have, or would reasonably be expected to have, a
Material Adverse Effect.
(b) The Borrower has also furnished to the Banks a pro forma
consolidated balance sheet as of September 30, 1997 of the Borrower and its
Consolidated Subsidiaries (including KAP and its Consolidated Subsidiaries)
giving effect to the Transaction. Such pro forma balance sheet presents fairly
the financial condition of the Borrower and its Consolidated Subsidiaries
(including KAP and its Consolidated Subsidiaries) on a pro forma basis and were
prepared in accordance with GAAP to the extent such principles can be applied on
a pro forma basis.
<PAGE>
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(c) The Borrower has also furnished to the Banks projected financial
statements for the Borrower and its Consolidated Subsidiaries (including KAP and
its Consolidated Subsidiaries) for each of the seven fiscal years following the
Closing Date, demonstrating the projected consolidated financial condition,
results of operations and cash flows of the Borrower and its Consolidated
Subsidiaries (including KAP and its Consolidated Subsidiaries) for such periods,
after giving effect to the Transaction. Such projections are accompanied by a
written statement of the assumptions and estimates underlying such projections.
Such projections, assumptions and estimates were made on a reasonable basis and
in good faith, and nothing has come to the attention of the Borrower which would
lead either to believe that such projections will not be attained or exceeded.
4.07. No Event of Default; Compliance with Instruments.
------------------------------------------------
No event has occurred and is continuing and no condition exists which
constitutes an Event of Default or Potential Default. Except as set forth on
Schedule 4.07, none of the Borrower, any of the Borrower's Subsidiaries, KAP or
any of KAP's Subsidiaries is in violation of (a) its articles of incorporation
or bylaws (or other comparable constituent documents) or (b) any agreement or
instrument to which it is a party or by which it or any of its respective
properties may be subject or bound, the consequences of which has, or would
reasonably be expected to have, a Material Adverse Effect.
4.08. Litigation.
----------
Except as set forth in the financial statements referred to in Section
4.06 or as set forth on Schedule 4.08, there is no pending or (to the Borrower's
knowledge after due inquiry) threatened proceeding by or before any Official
Body against or affecting the Borrower, any of the Borrower's Subsidiaries, KAP
or any of KAP's Subsidiaries (a) seeking to challenge, prevent or declare
illegal any of the transactions contemplated by the Transaction, this Agreement
or the Related Documents, or (b) as to which there is a reasonable probability
of it being adversely decided and, if adversely decided, which would reasonably
be expected to have a Material Adverse Effect.
4.09. Subsidiaries.
------------
Schedule 4.09 sets forth, upon the consummation of the Transaction, the
authorized capitalization of the Borrower and each of its Subsidiaries, the
number of shares of each class of capital stock of each thereof issued and
outstanding and the number and percentage of outstanding shares of each such
class of capital stock owned by the Borrower or any of its Subsidiaries. Upon
consummation of the Transaction the outstanding shares of the Borrower and each
of its Subsidiaries (other than the Unrestricted Subsidiaries) will have been
duly authorized and validly issued and are fully paid and nonassessable. Upon
<PAGE>
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consummation of the Transaction, the Borrower and its Subsidiaries (other than
the Unrestricted Subsidiaries) each will own beneficially and of record and have
good title to all the shares each is listed as owning on Schedule 4.09, free and
clear of any Lien. Except as set forth on Schedule 4.09, upon consummation of
the Transaction, there will be no options, warrants, calls, subscriptions,
conversion rights, exchange rights, preemptive rights or other rights,
agreements or arrangements (contingent or other) which may in any circumstances
now or hereafter obligate the Borrower or any of its Subsidiaries (other than
the Unrestricted Subsidiaries) to issue any shares of its capital stock or any
other securities. Upon consummation of the Transaction, the Borrower will have
no Significant Subsidiaries other than KAP and none of the Unrestricted
Subsidiaries (other than Koppers Hickson and its Subsidiaries, collectively)
will be Significant Subsidiaries with respect to KAP.
4.10. Pension-Related Matters.
-----------------------
A copy of the most recent Annual Report (5500 Series Form) including
all attachments thereto filed with the Internal Revenue Service has been made
available to the Banks for each Plan and fairly presents the funding status of
each Plan. There has been no material deterioration in any Plan's funding
status since the date of such Annual Report. Schedule 4.10 sets forth as of the
date hereof a list of (a) all Australian superannuation plans to which KAP or
any of its Consolidated Subsidiaries is a party and (b) all Plans and
Multiemployer Plans and all available information with respect to the Borrower's
or any Controlled Group Member's direct, indirect or potential withdrawal
liability to any Multiemployer Plan. Except as set forth on Schedule 4.10, the
Borrower has no liability in excess of $750,000 (contingent or otherwise) for,
and none of Borrower's property or assets are encumbered in connection with, (a)
failure to meet the minimum funding requirements under ERISA or the Code with
respect to a Plan (including joint and several liability with Controlled Group
Member for the minimum funding requirement and the excise tax for failure to
meet such requirement, any lien for contributions with respect to a Plan which
are due and unpaid by the Borrower or a Controlled Group Member, and any
security posted by the Borrower to obtain a waiver of the minimum funding
requirement), (b) any amendment to a Plan described in Code Section 401(a)(29)
or ERISA Section 307, (c) any PBGC premiums in excess of $250,000 with respect
to a Plan which are due and unpaid by the Borrower or a Controlled Group Member,
(d) the termination of a Plan or withdrawal by the Borrower or a Controlled
Group Member from any Multiemployer Plan or (e) any underfunding of any
Australian employee benefit plan.
4.11. Title to Property.
-----------------
Schedule 4.11 sets forth a description of all real property owned by or
leased to the Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries
(other than the
<PAGE>
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Unrestricted Subsidiaries). The Borrower, the Borrower's Subsidiaries, KAP and
KAP's Subsidiaries (other than the Unrestricted Subsidiaries) each has good and
marketable title to all real property purported to be owned by it and good and
marketable title to all other property purported to be owned by it, subject only
to Permitted Liens. Except as set forth on Schedule 4.11, all such property is
in good operating condition and repair, except to the extent that any failure to
be in such condition and repair does not have, or would not reasonably be
expected to have, a Material Adverse Effect, and the Borrower's, the Borrower's
Subsidiaries', KAP's and KAP's Subsidiaries' (other than the Unrestricted
Subsidiaries) use thereof conforms in all material respects to all Laws
applicable thereto. Except as set forth on Schedule 4.11, the Borrower, the
Borrower's Subsidiaries, KAP and KAP's Subsidiaries (other than the Unrestricted
Subsidiaries) each has full and complete right to use and possession of all
properties purported to be leased by it. Except as set forth on Schedule 4.11,
the Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries (other
than the Unrestricted Subsidiaries) are each in compliance in all material
respects with all leases applicable to it.
4.12. Contracts.
---------
Except as stated on Schedule 4.12, none of the Borrower, any of the
Borrower's Subsidiaries, KAP or any of KAP's Subsidiaries (other than the
Unrestricted Subsidiaries) is a party to or is subject to any agreement or
instrument of any kind (including agreements to repay borrowed money,
guarantees, leases of real or personal property as lessor or lessee, contracts
for future purchase or delivery of goods or rendering of services, powers of
attorney, distribution arrangements, patent license agreements, collective
bargaining agreements, employment agreements, bonus, pension or retirement
plans, or vacation pay, insurance or welfare agreements) other than agreements
or instruments which are terminable at will by such person without penalty or
which do not have, or would not reasonably be expected to have, if lost, a
Material Adverse Effect. The Borrower, the Borrower's Subsidiaries, KAP and
KAP's Subsidiaries (other than the Unrestricted Subsidiaries) are each and, to
the Borrower's knowledge, all other parties to all agreements and instruments to
which any thereof is a party are, in substantial compliance with the terms
thereof, and none of the Borrower, any of the Borrower's Subsidiaries, KAP or
any of KAP's Subsidiaries (other than the Unrestricted Subsidiaries) or, to the
Borrower's knowledge, any other party, is in default thereunder (and no event
has occurred which, but for the giving of notice or the passage of time or both,
would constitute such a default) which default has, or would reasonably be
expected to have, a Material Adverse Effect.
4.13. Taxes.
-----
All tax returns required to be filed by the Borrower, the Borrower's
Subsidiaries, KAP and KAP's Subsidiaries (other than the Unrestricted
Subsidiaries) have
<PAGE>
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been properly prepared, executed and filed. All taxes, assessments, fees and
other governmental charges upon the Borrower, its Subsidiaries, KAP and KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) or upon any of their
respective properties, incomes, sales or franchises which are due and payable
have been paid, except for any nonpayment permitted by Section 6.05. The
reserves and provisions for taxes on the books of the Borrower, each of the
Borrower's Subsidiaries, KAP and each of KAP's Subsidiaries for all open years
and for its current fiscal period are adequate in accordance with GAAP. None of
the Borrower, any of the Borrower's Subsidiaries, KAP or any of KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) knows of any proposed
additional assessment or basis for any material assessment for additional taxes
(whether or not reserved against), except as set forth on Schedule 4.13.
4.14. Financial Accounting Practices.
------------------------------
The Borrower, the Borrower's Subsidiaries, KAP and each of KAP's
Subsidiaries each makes and keeps books, records and accounts which, in
reasonable detail, accurately and fairly reflect their respective transactions
and dispositions of their respective assets, and each maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(a) transactions are executed in accordance with management's general or
specific authorization, (b) transactions are recorded as necessary (i) to permit
preparation of financial statements in conformity with GAAP and (ii) to maintain
accountability for assets, (c) access to assets is permitted only in accordance
with management's general or specific authorization and (d) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals, and appropriate action is taken with respect to any differences.
4.15. No Material Adverse Change.
--------------------------
Since September 30, 1997 there has been no material adverse change in
the business, operations, condition, financial or otherwise, or prospects of the
Borrower or the enterprise comprised of the Borrower, the Borrower's
Subsidiaries, KAP and KAP's Subsidiaries taken as a whole or the ability of any
of the foregoing to consummate the Transaction or to perform any of their
respective obligations under this Agreement or the Related Documents.
4.16. Regulation U.
------------
The Borrower shall make no use of any of the credits hereunder for the
purpose of buying or carrying any "margin stock," as such term is used in
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time. None of the Borrower, any of the Borrower's Subsidiaries,
KAP or any of KAP's
<PAGE>
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Subsidiaries owns any "margin stock" or is engaged in the business of extending
credit to others for the purpose of buying or carrying any "margin stock," and
no Loan or Letter of Credit nor any proceeds of any thereof will be used for any
such purpose. Neither the making of any Loan or the issuance of any Letter of
Credit nor any use thereof or of any of the proceeds of any thereof will violate
or conflict with any of the provisions of Regulation G, T, U or X of the Board
of Governors of the Federal Reserve System, as amended from time to time.
4.17. Compliance with Laws.
--------------------
Except as set forth on Schedule 4.17, none of the Borrower, any of the
Borrower's Subsidiaries, KAP or any of KAP's Subsidiaries (other than the
Unrestricted Subsidiaries) is in violation of, or subject to any contingent
liability on account of, any Law (including ERISA, the Code, any applicable
occupational and health, safety or welfare Law, environmental protection Law or
hazardous waste or toxic substances management, handling or disposal Law, and
including (a) any restrictions, specifications or requirements pertaining to
products that the Borrower, any of the Borrower's Subsidiaries, KAP or any of
KAP's Subsidiaries (other than the Unrestricted Subsidiaries) manufactures,
processes or sells or pertaining to the services any thereof performs, (b) the
conduct of their respective businesses, and (c) the use, maintenance or
operation of the real and personal properties owned or possessed by them),
except for violations which, in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect.
4.18. Patents, Licenses, Franchises.
-----------------------------
The Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries
(other than the Unrestricted Subsidiaries) each owns or possesses or otherwise
has the right to use all the patents, inventions, technology, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and rights
with respect to the foregoing necessary to own or operate its properties or
carry on its business as presently conducted or presently planned to be
conducted without conflict with the rights of others. Schedule 4.18 sets forth
as of the date hereof all material patents, patent applications, trademarks,
service marks and applications therefor and inventions and copyrights of the
Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries (other than
the Unrestricted Subsidiaries). Except as set forth on Schedule 4.18, as of the
date hereof, there are no claims of infringement or misappropriation of
proprietary rights of others pending or threatened by or against the Borrower,
any of the Borrower's Subsidiaries, KAP or any of KAP's Subsidiaries (other than
the Unrestricted Subsidiaries).
4.19. Accurate and Complete Disclosure.
--------------------------------
<PAGE>
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No representation or warranty made by the Borrower or any Guarantor
under (or, in the case of any such representation or warranty made prior to the
date hereof, in connection with) this Agreement or the Related Documents, and no
statement made by the Borrower or any Guarantor in any financial statement
(furnished pursuant to Section 4.06 or otherwise), certificate, report, exhibit
or document furnished by or on behalf of the Borrower or any Guarantor to the
Bank Parties pursuant to (or, in the case of any statement, certificate, report,
exhibit or document furnished prior to the date hereof, in connection with) this
Agreement or the Related Documents is false or misleading in any material
respect, including by omission of material information necessary to make such
representation, warranty or statement, in light of the circumstances under which
they were made, not misleading (as of the date hereof, in the case of any
representation or warranty, statement, certificate, report, exhibit or document
made or given on or prior to the date hereof, and as of the date when made, in
the case of any representation or warranty, statement, certificate, report,
exhibit or document made or given after the date hereof). The Borrower has
disclosed to the Banks in writing every fact (other than those relating to
political, social or economic events, changes or effects of general national or
global scope) which has, or which so far as the Borrower can now foresee is
reasonably possible in the future and which will have, or would reasonably be
expected to have, a Material Adverse Effect.
4.20. Investment Company.
------------------
None of the Borrower, the Borrower's Subsidiaries, KAP or any of KAP's
Subsidiaries is an "investment company" or a company "controlled" by an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
4.21. Public Utility Holding Company.
------------------------------
None of the Borrower, the Borrower's Subsidiaries, KAP or KAP's
Subsidiaries is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of either a "holding company" or a "subsidiary
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
4.22. Proceeds.
--------
Schedule 4.22 sets forth the sources and uses of funds necessary to
consummate the Transaction. Other than the uses of funds specified on Schedule
4.22, the Borrower will use the Loans and Letters of Credit (or the proceeds of
any thereof) only as follows:
<PAGE>
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(a) On the Closing Date, the Australian Term Loan Letter of Credit and
the Australian Revolving Loan Letter of Credit will be issued to provide
credit support for the Australian Credit Facilities;
(b) To the extent not used on the Closing Date as set forth on
Schedule 4.22, the Term Loan A Facility Term Loans may be used for a period
of up to 364 days from the date of this Agreement to repurchase Senior
Notes remaining outstanding after the Closing Date, to repurchase, at a
price of $17.00 per share, shares of common stock of the Borrower held by
certain Management Investors for an aggregate purchase price not to exceed
$15,000,000 (the "Management Stock Repurchase") and to consummate the APT
Post-Transaction Repurchase; and
(c) The Revolving Credit Loans, the Standby or Trade Letters of Credit
and the Swingline Loans (and the proceeds of any thereof) as may from time
to time be available shall be used only for the Borrower's working capital
or general corporate purposes.
4.23. Affiliated Entities.
-------------------
Schedule 4.23 sets forth as of the date hereof the name of,
jurisdiction of organization of, nature of, and the nature of the Borrower's,
each of its Subsidiaries, KAP, each of KAP's Subsidiaries and each Affiliated
Entity's interest in and liabilities to, for the acts of, or with respect to,
each Affiliated Entity.
4.24. Regulation O.
------------
No director, executive officer or principal shareholder of the Borrower
is a "director," "executive officer" or "principal shareholder," as such terms
are used in Regulation O of the Board of Governors of the Federal Reserve
System, as amended from time to time, of any Bank.
4.25. Burdensome Obligations.
----------------------
Except as set forth on Schedule 4.25, none of the Borrower, any of the
Borrower's Subsidiaries, KAP or any of KAP's Subsidiaries (other than the
Unrestricted Subsidiaries) nor any of their respective properties is subject to
or bound by any Law or, to the Borrower's knowledge after due inquiry, any
pending or threatened change of Law, or subject to any restriction under its
respective articles of incorporation or bylaws (or other comparable constituent
documents) or under any agreement or instrument to which it is a party or by
which it or any of its respective properties may be subject or bound, which is
so
<PAGE>
-83-
unusual and burdensome as to have, or to be reasonably likely in the
foreseeable future to have, a Material Adverse Effect.
4.26. Insurance.
---------
The Borrower, the Borrower's Subsidiaries, KAP and KAP's Subsidiaries
(other than the Unrestricted Subsidiaries) each maintains with financially sound
and reputable insurers insurance with respect to its respective properties and
businesses and against at least such liabilities, casualties and contingencies
and in at least such types and amounts as is customary in the case of
corporations engaged in the same or a similar business or having similar
properties similarly situated and otherwise in accordance with the terms of the
Security Documents. Schedule 4.26 sets forth a list of all insurance currently
maintained by the Borrower, the Borrower's Subsidiaries, KAP and KAP's
Subsidiaries (other than the Unrestricted Subsidiaries).
4.27. Delivery of the Senior Note Documents and Senior
Subordinated Note Documents.
----------------------------
The Borrower has provided or caused to be provided, in each case, to
the Banks true, correct and complete copies of the Senior Note Documents and the
Senior Subordinated Note Documents in the form executed or contemplated for
execution, as the case may be (including all exhibits, schedules and disclosure
letters, if any, delivered pursuant thereto), and all amendments thereto,
waivers relating thereto and other side letters or agreements affecting the
terms thereof. The Senior Subordinated Note Purchase Agreement has been duly
executed and delivered by the Borrower and is in full force and effect. The
representations and warranties of the Borrower contained in the Senior
Subordinated Note Purchase Agreement are true and correct in all material
respects on the date hereof as if made on and as of the date hereof, and each
Bank shall be entitled to rely on such representations and warranties with the
same force and effect as if they were set forth in this Agreement in full and
made to each Bank directly.
4.28. Security Documents.
------------------
(a) The Security Documents are effective to create in favor of the
Collateral Agent, for the benefit of the Bank Parties, a legal, valid and
enforceable security interest in all right, title and interest of the Borrower
and the Guarantors in and to the Collateral described therein. The Security
Documents constitute a fully perfected first Lien on, and security interest in,
all right, title and interest of the Borrower and the Guarantors in and to such
Collateral, subject only to Permitted Liens.
<PAGE>
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(b) Each Mortgage and each Australian Mortgage is effective to grant
to the Collateral Agent, for the benefit of the Bank Parties, a legal, valid and
enforceable mortgage lien on and security interest in all right, title and
interest of the mortgagor thereunder in and to the Mortgaged Property or the
Australian Mortgaged Property, as the case may be, described therein. When each
Mortgage and each Australian Mortgage is duly recorded in the offices in the
jurisdictions listed on Schedule 4.28, and the recording fees and taxes
(including any necessary stamp duty) in respect thereof are paid and compliance
is otherwise had with the formal requirements of local law generally applicable
to the recording of real estate mortgages, each Mortgage and each Australian
Mortgage will constitute a fully perfected Lien on such Mortgaged Property or
Australian Mortgaged Property, as the case may be, subject only to Permitted
Liens; and each Mortgage and each Australian Mortgage also creates a legal,
valid, enforceable and perfected first Lien on all right, title and interest of
the Borrower or the Guarantors, as the case may be, in and to all personal
property which is the subject of such Mortgage or Australian Mortgage subject
only to Permitted Liens.
4.29. Solvency.
--------
On the Closing Date, both before and after giving effect to the
incurrence of all Indebtedness incurred by the Borrower and each Guarantor on
such date, (a) the sum of the respective debts and liabilities (including
contingent liabilities) of the Borrower and each Guarantor will not be greater
than all the respective assets of the Borrower and each such Guarantor at a fair
valuation, (b) the then present fair salable value of the respective assets of
the Borrower and each Guarantor will not be less than the amount required to pay
the respective probable liabilities of the Borrower and each such Guarantor on
their debts as they become absolute and matured, (c) the Borrower and each
Guarantor will not have incurred, and do not believe that they will incur, debts
or liabilities (including contingent liabilities) beyond the Borrower's or each
such Guarantor's ability to pay as such debts and liabilities mature, (d) the
Borrower and each Guarantor will not have been engaged in a business or a
transaction for which the Borrower's or each such Guarantor's property
constitutes or would constitute unreasonably small capital (as such term is used
in any Law referred to in the following clause (e)), and (e) the Borrower and
each Guarantor were not and are not otherwise insolvent as defined in, or
otherwise in a condition which could in any circumstances render any transfer,
conveyance, obligation or act made, incurred or performed by them avoidable or
fraudulent pursuant to, any Law that may be applicable to any such person
pertaining to bankruptcy, insolvency or creditors' rights (including Title 11
(Bankruptcy) of the United States Code, as amended, the Uniform Fraudulent
Conveyance Act or Uniform Fraudulent Transfer Act or other applicable Law
pertaining to fraudulent conveyances or fraudulent transfers or preferences).
4.30. Hazardous Materials.
-------------------
<PAGE>
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The Borrower and KAP, to the Borrower's knowledge, and except as
otherwise disclosed on Schedule 4.30, have substantially complied with, are
currently in substantial compliance with, have not been charged with, have not
received any notice of, and are not under investigation for, the failure to
substantially comply with any and all Laws relating to human health, safety or
welfare or environmental protection matters and, specifically, those relating to
Hazardous Substances. Except as otherwise disclosed on Schedule 4.30, none of
the Mortgaged Property, or any portion thereof, is presently listed or proposed
for listing on the National Priorities List, on the Comprehensive Environmental
Response, Compensation and Liability Information System List, or on any similar
state list of sites requiring investigation or cleanup.
4.31. Acquisition Agreement and Acquisition
Agreement Guarantee.
--------------------
The environmental indemnification provisions of the Acquisition
Agreement (including Article IX thereof) and the Acquisition Agreement Guarantee
are legal, valid and binding obligations of Beazer East and Beazer Limited,
respectively, enforceable in accordance with the terms thereof, except, in each
case, as such enforceability may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally.
4.32. Existing Indebtedness.
---------------------
Except as set forth on Schedule 4.32, none of the Borrower, any
Subsidiary of the Borrower, KAP or any Subsidiary of KAP have any outstanding
Indebtedness for Borrowed Money (each such item specified on Schedule 4.32 being
referred to as "Existing Indebtedness"). Upon consummation of the Transaction,
neither the Borrower nor any Subsidiary of the Borrower (other than the
Unrestricted Subsidiaries) will have any outstanding Indebtedness which is not
Permitted Indebtedness.
4.33. Employment Agreements.
---------------------
Except as set forth on Schedule 4.33, upon consummation of the
Transaction, neither the Borrower nor KAP will be a party to any employment
agreement with any officer, in the case of the Borrower, or director, in the
case of KAP thereof.
4.34. Guarantors.
----------
Except as set forth on Schedule 4.34, upon consummation of the
Transaction, no Subsidiary of the Borrower (x) will be a Significant Subsidiary
or (y) other than KHC Assurance, Inc. will have any liability pursuant to any
Guaranty Equivalent (other than the Guarantees). The Borrower will cause each
Subsidiary of the Borrower listed on Schedule
<PAGE>
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4.34 (other than an Unrestricted Subsidiary and KHC Assurance, Inc.) to execute
and deliver on the Closing Date a Subsidiary Guarantee, in the case of
Subsidiaries of the Borrower incorporated in a State of the United States of
America, or an Australian Subsidiary Guarantee, in the case of Subsidiaries of
the Borrower incorporated in a State of Australia.
4.35. Transaction Documents.
---------------------
The Borrower has provided or caused to be provided, or by the Closing
Date shall have been provided or caused to be provided, to the Banks true,
correct and complete copies of the Transaction Documents (in each case including
all exhibits, schedules and disclosure letters, if any, delivered pursuant
thereto), and all amendments thereto, waivers relating thereto and other side
letters or agreements affecting the terms thereof. The Transaction Documents
have not been, and by the Closing Date shall not have been, amended, modified or
supplemented, nor have, nor shall have, any of the provisions thereof been
waived, except in accordance with this Agreement. Each Transaction Document has
been duly executed and delivered by the Borrower or KAP, to the extent it is a
party thereto, and is in full force and effect. The representations and
warranties of the Borrower, KAP, any of their respective Subsidiaries and, to
the knowledge of the Borrower, each other party thereto contained in each of the
Transaction Documents are true and correct in all material respects on and as of
the date hereof as if made on and as of the date hereof, and shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of the Closing Date, and, to the extent made by the Borrower, KAP, or any of
their respective Subsidiaries, each Bank shall be entitled to rely on such
representations and warranties with the same force and effect as if they were
set forth in this Agreement in full and made to each Bank directly. The
provisions of each of the Transaction Documents, including, without limitation,
all representations, warranties and covenants of the parties thereto other than
the Borrower and KAP, are and shall be legal, valid and binding obligations of
such other parties, enforceable in accordance with the terms thereof.
4.36. Senior Subordinated Notes.
-------------------------
(a) The offering and sale of the Senior Subordinated Notes has and
will be made in accordance with the applicable terms of the Securities Act of
1933, applicable state securities laws and other applicable Laws. Each offering
memorandum used in connection with the offering and sale of the Senior
Subordinated Notes does not and will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading.
<PAGE>
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(b) All of the Obligations constitute and will constitute "Senior
Debt" and "Designated Senior Debt" within the meaning of such term in the Senior
Subordinated Note Indenture. The subordination provisions of the Senior
Subordinated Note Indenture are enforceable against the Borrower, each Guarantor
and the holders from time to time of the Senior Subordinated Notes.
ARTICLE V.
CONDITIONS PRECEDENT
--------------------
5.01. Conditions to Initial Extensions of Credit.
------------------------------------------
The effectiveness of this Agreement and the agreement of each Bank to
make its initial Loan or Loans, and of each Issuing Bank to issue any Letter of
Credit, on the Closing Date is subject to the satisfaction, on and as of the
Closing Date, of the following conditions precedent:
(i) The Administrative Agent shall have received for each Bank a
counterpart of this Agreement, a Term Loan A Note, Term Loan B Note and
Revolving Credit Note for each Bank (unless such Bank shall not have a
Committed Amount with respect the Obligations evidenced by any such Note),
and the Swingline Note for the Swingline Bank, in each case, duly executed
by the Borrower and conforming to the requirements hereof.
(ii) The Administrative Agent shall have received, in form and
substance satisfactory to the Agents, with a counterpart or copy for each
Bank Party, (y) each of the Security Documents, duly executed by each
respective Credit Party which is a party thereto, and (z) such other
documents and instruments as may be necessary or appropriate to perfect the
Lien thereof in the Collateral covered thereby, duly executed, to the
extent necessary, by the appropriate Credit Party.
(iii) All fees and other compensation required to be paid on or
prior to the Closing Date to any of the Bank Parties pursuant hereto or to
the Commitment Letters shall have been paid or received.
(iv) The Administrative Agent shall have received, with a
counterpart for each Bank, a certificate or certificates of the Secretary
or an Assistant Secretary of the Borrower, dated the Closing Date, as to
(w) true copies of the Stockholders' Agreement as in effect on such date,
(x) true copies of the articles of incorporation and bylaws (or other
comparable constituent documents) of the Borrower and each
<PAGE>
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Guarantor as in effect on such date (which, in the case of the articles of
incorporation (or other comparable constituent document), shall be
certified to be true, correct and complete by the appropriate Official
Body, where available, not more than thirty (30) days before the Closing
Date), (y) true copies of all corporate action taken by the Borrower and
each Guarantor relative to this Agreement and the Related Documents
including certified copies of extract minutes of the board of directors of
each Australian Subsidiary Guarantor authorizing the signing and delivery
of and observance of obligations under the Security Documents to which it
is a party, appointing authorized officers, in the case of the Borrower, or
directors, in the case of KAP, and which acknowledge that those documents
will benefit that Australian Subsidiary Guarantor, and (z) the incumbency
and signatures of the respective officers of the Borrower and each
Guarantor executing this Agreement and/or any Related Documents to which
the Borrower or any such Guarantor is a party, together with satisfactory
evidence of the incumbency of such Secretary or Assistant Secretary. The
Administrative Agent shall have received, with a copy for each Bank,
certificates from the appropriate Official Bodies, dated not more than
thirty (30) days before the Closing Date, showing the authority and good
standing of the Borrower and each Guarantor in each jurisdiction where the
conduct of their respective businesses requires such qualification.
(v) The Administrative Agent shall have received, with copies or
executed counterparts for each Bank, true and correct copies (in each case
certified as to authenticity on the Closing Date) of all Official
Authorizations, if any, referred to on Schedule 4.04 and not previously
delivered to the Administrative Agent, and all such Official Authorizations
shall be satisfactory in form and substance to the Administrative Agent and
shall be in full force and effect.
(vi) The Administrative Agent shall have received, with copies or
executed counterparts for each Bank, true and correct copies of each
consent, waiver, amendment or agreement, if any, which has been obtained by
or on behalf of the Borrower or any of its Subsidiaries in respect of any
matter which, absent such consent, waiver, amendment or agreement, would be
within the scope of clause (b)(ii) of Section 4.05, and such items shall be
satisfactory in form and substance to the Administrative Agent and shall be
in full force and effect.
(vii) The Administrative Agent shall have received, with a copy for
each Bank, copies of the pro forma balance sheets and projections referred
to in Sections 4.06(b) and (c), each certified by the Chief Financial
Officer of the Borrower, and all of which shall be satisfactory in form and
substance to the Administrative Agent.
<PAGE>
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(viii) No suit, action, investigation, inquiry or other proceeding
(including the enactment or promulgation of any statute or rule) by or
before any arbitrator or any Official Body shall be pending, and no
preliminary or permanent injunction or order by any state or federal court
shall have been entered, (i) in connection with the Transaction, this
Agreement or the Related Documents, or any of the transactions contemplated
hereby or thereby, or (ii) which, in any such case, has, or would
reasonably be expected to have, a Material Adverse Effect.
(ix) No event shall have occurred which, in the judgment of the
Required Banks, constitutes a material adverse change in the business,
operations, condition, financial or otherwise, or prospects of the
Borrower, KAP or the enterprise comprised of the Borrower, the Borrower's
Subsidiaries, KAP and KAP's Subsidiaries taken as a whole since September
30, 1997. No facts or circumstances shall have been discovered by the Banks
which would be materially inconsistent with the assumptions underlying the
projections or with the other information furnished to the Administrative
Agent by the Borrower. No transaction (other than the Transaction) entered
into by the Borrower, any of the Borrower's Subsidiaries, KAP or any of
KAP's Subsidiaries, whether or not in the ordinary course of business,
shall, in the reasonable judgment of the Administrative Agent, be
materially adverse to the Borrower, the Borrower's Subsidiaries, KAP and
KAP's Subsidiaries, taken as a whole.
(x) The Administrative Agent shall have received a certificate from
Johnson & Higgins Intermediaries, Inc., with a copy for each Bank, dated as
of a recent date, and other evidence satisfactory to it, that the insurance
policies required by this Agreement and the Security Documents have been
obtained.
(xi) Any documents or instruments (including financing statements)
required to be filed under or in connection with any of the Security
Documents in order to create, in favor of the Collateral Agent, a perfected
first Lien on the Collateral described therein with respect to which a
mortgage, charge or security interest may be perfected by recording or
filing shall have been executed and delivered to the Collateral Agent or
its legal advisors (including, without limitation, in respect of the
charges comprised in the Australian Mortgages, duly signed and completed
ASC Forms 309, signed but undated ASC Forms 350 and signed authorities to
complete ASC Forms 350) and, if requested by the Collateral Agent, properly
recorded or filed in each office in each jurisdiction listed on Schedule
4.28; and such recordings or filings shall be the only ones required in
order to create in favor of the Collateral Agent, for the benefit of the
Bank Parties, a perfected first Lien on the Collateral described therein in
each of the jurisdictions listed on Schedule 4.28. The Collateral Agent
shall have received (or promptly after the Closing Date shall receive)
evidence
<PAGE>
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satisfactory to it in its reasonable discretion of each such filing,
registration or recording and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto. There shall have been
delivered to the Collateral Agent all such other documents and instruments
(including certificates of title) necessary or appropriate to create in
favor of the Collateral Agent, for the benefit of the Bank Parties, a
perfected first Lien on the Collateral.
(xii) To the extent requested by the Collateral Agent, the
Collateral Agent shall have received in respect of each parcel covered by
each Mortgage a title insurance policy (or policies) dated the Closing
Date. Each such policy shall (i) be in an amount satisfactory to the
Collateral Agent; (ii) be issued at ordinary rates; (iii) ensure that the
Mortgage insured thereby creates a valid first Lien on such parcel or
estate of the Borrower or applicable Guarantor, as the case may be, therein
free and clear of all defects and encumbrances, except such as may be
approved by the Collateral Agent; (iv) name the Collateral Agent for the
benefit of the Bank Parties as the insured thereunder; (v) be in the form
of ALTA Loan Policy - 1970 (or other form acceptable to the Collateral
Agent); (vi) contain such endorsements and affirmative coverage as the
Collateral Agent may reasonably request; and (vii) be issued by a title
insurance company satisfactory to the Collateral Agent.
(xiii) The Collateral Agent shall have received a copy of such of
the recorded documents referred to, or listed as exceptions to title in,
the title policy or policies referred to in subsection 5.01(xii) as the
Collateral Agent may request and a copy of all other documents requested by
the Collateral Agent affecting any part of the Mortgaged Property (and not
previously delivered to the Collateral Agent).
(xiv) The Collateral Agent shall have received the results
satisfactory to the Agents of a recent search by a person satisfactory to
it of the Uniform Commercial Code, Australian Securities Commission or
other filing with Official Bodies, if any, which may have been filed with
respect to personal property of the Borrower and each Guarantor in each of
the locations set forth on Schedule 4.28.
(xv) The Administrative Agent shall have received, with an
executed counterpart for each Bank, opinions, dated the Closing Date, of
counsel to the Borrower and KAP, substantially in the form of Exhibits G-1
and G-2.
(xvi) The Administrative Agent shall have received, with an
executed counterpart for each Bank, an opinion of each local counsel listed
on Schedule 5.01(xvi), in the form of Exhibit G-3 or Exhibit G-4, as
appropriate, to reflect the laws of the respective jurisdictions as to
validity, binding effect and enforceability of the Related Documents,
creation and perfection of Liens and other
<PAGE>
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matters, and such other matters incident to the transactions contemplated
hereby or by the Related Documents as the Administrative Agent may
reasonably request.
(xvii) There shall be no substantial impairment of the financial
markets generally, or any change in national or international financial,
political or economic conditions which, in the opinion of the Agents, would
reasonably be expected to materially and adversely affect the transactions
contemplated by this Agreement or the Related Documents.
(xviii) The conditions set forth in subsections (a) through (d),
inclusive, of Section 5.02 shall have been satisfied.
(xix) The Agents shall have received, with copies or executed
counterparts for each Bank, a certificate from the Chief Financial Officer
of the Borrower and an opinion of Houlihan, Lokey, Howard & Zukin Financial
Advisors, Inc. in form and substance reasonably satisfactory to the Agents
with respect to the solvency of each of the Borrower and KAP immediately
after the consummation of the Transaction.
(xx) The terms, conditions and structure of the Transaction (and
the documentation therefor) shall be in form and substance satisfactory to
the Agents.
(xxi) The Borrower shall have received aggregate gross proceeds
(i.e., before payment of expenses, underwriting fees, discounts and the
----
like) of at least $175 million from the sale of Senior Subordinated Notes
pursuant to agreements, including interest rate, tenor, terms and
conditions thereunder, in form and substance reasonably satisfactory to the
Agents.
(xxii) Each transaction which is a component of the Transaction
(other than the making of the initial Loans and the issuance of the
Australian Term Loan Letter of Credit and the Australian Revolving Loan
Letter of Credit) shall have been consummated in all material respects in
accordance with the terms hereof and the terms of documentation therefor
(without the waiver of any material condition unless consented to by the
Agents) in form and substance reasonably satisfactory to the Agents.
(xxiii) All obligations of the Borrower and its Subsidiaries (other
than Unrestricted Subsidiaries) with respect to Existing Indebtedness
(other than Permitted Indebtedness described in clauses (c), (d), (g) and
(h) of Section 7.03) shall be repaid in full (or provisions made therefor
satisfactory to the Agents) and all lending commitments thereunder
terminated to the reasonable satisfaction of the Agents with all security
interests in favor of existing lenders being unconditionally released, and
<PAGE>
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evidence of the foregoing reasonably satisfactory to the Agents shall have
been provided in writing. The Agents may, in their sole and exclusive
discretion, accept from the lenders of Existing Indebtedness written
confirmation that all obligations of the Borrower and its Subsidiaries
under any such Existing Indebtedness have been satisfied and that all
lending commitments thereunder have been terminated and that all security
interests in favor of existing lenders will be promptly and unconditionally
released.
(xxiv) The Borrower shall have received the required consents from
the holders of the Senior Notes necessary to cause the trustee under the
Senior Note Indenture to enter into an amendment to the Senior Note
Indenture in form and substance reasonably satisfactory to the Agents, and
the Borrower shall have accepted for payment all Senior Notes tendered by
the holders thereof in the tender offer related to the aforementioned
consents.
(xxv) The Agents shall have been provided with copies of, and
shall be reasonably satisfied with, the employment agreements of officers
of the Borrower and KAP set forth on Schedule 4.33.
(xxvi) The Agents shall be satisfied with the proposed and actual
capitalization and corporate and organizational structure of the Borrower
and its Subsidiaries (after giving effect to the Transaction), including as
to direct and indirect ownership and as to the terms of the indebtedness
and capital stock of the Borrower and its Subsidiaries. Immediately after
giving effect to the Transaction, the Borrower and its Subsidiaries (other
than the Unrestricted Subsidiaries) shall have no outstanding Indebtedness
other than Permitted Indebtedness.
(xxvii) All material documentation and agreements related to the
Transaction or which, in the judgment of the Agents, affect the extension
of credit under this Agreement in any material respect shall be in form and
substance reasonably satisfactory to the Agents; and all material
conditions precedent under all documentation relating to the consummation
of the Transaction shall have been satisfied.
(xxviii) The Agents shall be reasonably satisfied as to the amount
and nature of all tax, ERISA, employee retirement benefit and other
contingent liabilities to which the Borrower, its Subsidiaries, KAP and
KAP's Subsidiaries (other than the Unrestricted Subsidiaries) may be
subject, and the plans of the Borrower, its Subsidiaries, KAP and KAP's
Subsidiaries (other than the Unrestricted Subsidiaries) with respect
thereto.
<PAGE>
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(xxix) The Banks shall have received reasonably satisfactory pro
forma balance sheets of the Borrower and its Subsidiaries after giving
effect to the Transaction and the financings contemplated hereby. The
Banks shall have received projected cash flows and income statements for
the period of seven years following the Closing Date, which projections
shall be based upon reasonable assumptions made in good faith and
reasonably satisfactory to the Banks. The Banks shall have received
unaudited interim combined (where available, and where not, uncombined)
consolidated and consolidating financial statements of the Borrower and its
Subsidiaries and KAP and its Subsidiaries for each fiscal month and
quarterly period ended subsequent to June 30, 1997 as to which such
financial statements are available. If as of the Closing Date any such
financial statements or projections are required to be updated in order to
remain accurate, such updated financial statements or projections shall
not, in the reasonable judgment of the Banks, reflect any material adverse
change as compared with the financial statements or projections previously
furnished to the Banks.
(xxx) The Agents shall be satisfied that Beazer East and Beazer
Limited are continuing to satisfy their respective obligations under the
Acquisition Agreement and the Acquisition Agreement Guarantee.
(xxxi) The Collateral Agent or its legal advisors have received
the original power of attorney for each Australian Subsidiary Guarantor
under which a person signs and delivers the Security Documents to which it
is a party and, if required by the Collateral Agent, evidence of its
stamping and registration.
(xxxii) The Collateral Agent or its legal advisors have received
(in form and substance satisfactory to the Collateral Agent and its legal
advisors) a duly signed certificate under section 2.06(b) of the Australian
Corporations Law issued by each Australian Subsidiary Guarantor in relation
to financial assistance given in relation to the acquisition of shares in
KAP.
(xxxiii) The Collateral Agent or its legal advisors shall have
received (in form and substance satisfactory to the Collateral Agent and
its legal advisors) (i) a statutory declaration from a director of each
Australian Subsidiary Guarantor stating that the entering into of the
Related Documents to which it is a party (and the performance of
obligations under them) does not contravene Part 3.2A of the Corporations
Law and the Australian Subsidiary Guarantor is not insolvent and will not
become insolvent as a result of the entering into of those documents; (ii)
share certificates for all the issued share capital of each Australian
Subsidiary Guarantor together with undated share transfer forms relating to
those shares duly executed by the relevant shareholder in each of those
companies as transferor; (iii) certified copies of extract minutes
<PAGE>
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of an extraordinary general meeting of shareholders of each Australian
Subsidiary Guarantor which evidence the unanimous resolutions of those
shareholders authorizing the signing and delivery of and observance of
obligations under the Related Documents to which it is a party; and (iv)
either evidence that the Security Documents have been stamped or the amount
of money which, in the reasonable opinion of the Collateral Agent, is
required for payment of stamp duty on each of the Security Documents.
(xxxiv) All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement and the Related Documents shall be
satisfactory in form and substance to each Agent in its sole discretion
including, but not limited to, the documents listed in Schedule
5.01(xxxiv).
5.02. Conditions to All Extensions of Credit.
--------------------------------------
The agreement of each Bank Party to make any Loan or issue any Letter
of Credit on any date (including the Closing Date) is subject to the
satisfaction of the following conditions precedent as of the date such Loan is
made or Letter of Credit is issued (or deemed to be issued):
(a) Notice. In the case of any Loan, appropriate Standard Notice
------
shall have been given by the Borrower before such date as provided in Section
2.04.
(b) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Borrower and each Guarantor in or pursuant to this
Agreement or the Related Documents shall be true and correct in all material
respects on and as of such date as if made on and as of such date (in the case
of the Loans to be made or Letters of Credit to be issued on the Closing Date,
after giving effect to the Transaction).
(c) No Default. No Event of Default or Potential Default shall have
----------
occurred and be continuing on such date or after giving effect to the Loan to be
made or Letter of Credit to be issued on such date (in the case of the Loans to
be made or Letters of Credit to be issued on the Closing Date, after giving
effect to the Transaction).
(d) No Violations of Law. Neither the making nor use of any Loan or
--------------------
Letter of Credit (or the proceeds of any thereof) shall cause any Bank Party to
be in violation of any Law.
Each Request by the Borrower that a Loan be made or Letter of Credit
be issued shall constitute a representation and warranty by the Borrower as of
the date of such
<PAGE>
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request that the conditions contained in this subsection 5.02 have been
satisfied. Failure of the Administrative Agent, an Issuing Bank or the Swingline
Bank, as the case may be, to receive notice from the Borrower to the contrary
before such Loan is made or Letter of Credit is issued shall constitute a
further representation and warranty by the Borrower that the conditions referred
to in this Section 5.02 have been satisfied as of the date such Loan is made or
such Letter of Credit is issued.
5.03. Additional Conditions to Issuances of Letters of Credit.
-------------------------------------------------------
The agreement of the Standby and Trade LC Issuing Bank to issue any
Letter of Credit is also subject to satisfaction of the conditions precedent set
forth in Sections 3.01 and 3.03.
ARTICLE VI.
AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants to the Banks as follows:
6.01. Reporting and Information Requirements.
--------------------------------------
(a) Annual Audit Reports. As soon as practicable, and in any event
--------------------
within 90 days after the close of each fiscal year, the Borrower shall furnish
to the Administrative Agent, with a copy for each Bank, consolidated and
consolidating statements of income, retained earnings and changes in financial
position and cash flow statements of the Borrower and its Consolidated
Subsidiaries (including Unrestricted Subsidiaries) for such fiscal year and a
consolidated and consolidating balance sheet of the Borrower and its
Consolidated Subsidiaries (including Unrestricted Subsidiaries) as of the close
of such fiscal year, and notes to each, all in reasonable detail, setting forth
in comparative form the corresponding figures for the preceding fiscal year,
with such consolidated statements and balance sheet to be certified by
independent certified public accountants of recognized national standing
selected by the Borrower and satisfactory to the Banks. The certificate or
report of such accountants shall be free of exceptions or qualifications not
acceptable to the Banks (and in any event shall be free of any exception,
qualification or explanation relating to ability to continue as a going concern,
limited scope of examination or independence), a copy of such certificate or
report shall be addressed to the Banks and signed by such independent public
accountants, and such certificate or report shall in any event contain a written
statement of such accountants substantially to the effect that (i) such
accountants examined such consolidated statements and balance sheet in
accordance with generally accepted auditing standards and accordingly made such
tests of accounting records and such other auditing procedures as such
accountants considered necessary in the circumstances, and (ii) in the
<PAGE>
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opinion of such accountants such consolidated statements and balance sheet
present fairly the financial position of the Borrower and its Consolidated
Subsidiaries (including Unrestricted Subsidiaries) as of the end of such fiscal
year and the results of their operations and the changes in their financial
position for such fiscal year, in conformity with GAAP applied on a basis
consistent with that of the preceding fiscal year (except for changes in
application in which such accountants concur). Simultaneously, with the delivery
to the Administrative Agent of the financial statements required by this Section
6.01(a), the Borrower shall also furnish to the Administrative Agent, with a
copy for each Bank, the certificate required pursuant to Section 2.06(b).
(b) Quarterly Reports. As soon as practicable, and in any event
-----------------
within forty-five (45) days after the close of each fiscal quarter of each
fiscal year, the Borrower shall furnish to the Administrative Agent, with a copy
for each Bank, unaudited consolidated and consolidating statements of income (or
Managing Directors' Reports), retained earnings and changes in financial
position and cash flow statements for the Borrower and its Consolidated
Subsidiaries (including Unrestricted Subsidiaries) for such fiscal quarter and
for the period from the beginning of such fiscal year to the end of such fiscal
quarter and an unaudited consolidated and consolidating balance sheet of the
Borrower and its Consolidated Subsidiaries (including Unrestricted Subsidiaries)
as of the close of such fiscal quarter, and notes to each, all in reasonable
detail, setting forth in comparative form the corresponding figures for the same
period or as of the same date during the preceding fiscal year (except for the
consolidated balance sheet, which shall set forth in comparative form the
corresponding balance sheet as of the prior fiscal year end), and certified by
the President, Treasurer or Chief Financial Officer of the Borrower as
presenting fairly the financial position of the Borrower and its Consolidated
Subsidiaries (including Unrestricted Subsidiaries) as of the end of such fiscal
quarter and the results of their operations and the changes in their financial
position for such fiscal quarter, in conformity with GAAP (other than with
respect to any Managing Directors' Reports) applied in a manner consistent with
that of the most recent audited financial statements furnished to the Banks,
subject to normal and recurring year-end audit adjustments. Simultaneously with
the delivery to the Administrative Agent of the financial statements required by
this Section 6.01(b), the Borrower shall also furnish to the Administrative
Agent, with a copy for each Bank, (i) such information concerning environmental
matters as the Administrative Agent or the Banks may reasonably request, such
information to be in form and scope satisfactory to the Administrative Agent or
the Banks, as the case may be, and (ii) the certificate required pursuant to
Section 2.06(b).
(c) Management Reports. Commencing January 1998, promptly after the
------------------
close of each month, each fiscal quarter and each fiscal year, and in any event
within thirty (30) days after the close of any such month, forty-five (45) days
after the close of any such fiscal quarter and 90 days after the close of any
such fiscal year, the Borrower shall deliver
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to the Administrative Agent, with a copy for each Bank, a management report, in
form and scope satisfactory to the Banks, which report shall contain, with
respect to monthly reports, without limitation, a consolidated statement of
revenues and earnings of the Borrower and its Consolidated Subsidiaries for such
month and, in each case, comparison of such amounts to projections for such
period and, if deviations from such projections are material, an explanation
therefor.
(d) Compliance Certificates. Concurrently with the delivery of each
-----------------------
set of financial statements referred to in Sections 6.01(a) and (b), the
Borrower shall deliver to the Administrative Agent, with a copy for each Bank, a
certificate, dated as of the end of the applicable fiscal year or quarter, as
the case may be, signed by the President, Treasurer or Chief Financial Officer
of the Borrower, (i) stating that as of the date thereof no Event of Default or
Potential Default has occurred and is continuing or exists, or, if an Event of
Default or Potential Default has occurred and is continuing or exists,
specifying in detail the nature and period of existence thereof and any action
with respect thereto taken or contemplated to be taken by the Borrower, (ii)
stating in reasonable detail the information and calculations necessary to
establish compliance with the provisions of Sections 7.01, 7.05(f), 7.05(g),
7.06(d), 7.10(c), 7.10(d), 7.10(e) and 7.14, and (iii) stating that the signer
has personally reviewed this Agreement and that such certificate is based on an
examination made by or under the supervision of the signer sufficient to assure
that such certificate is accurate.
(e) Accountants' Certificate. Each set of consolidated statements
------------------------
and balance sheet delivered pursuant to Section 6.01(a) shall be accompanied by
(i) a certificate or report, dated the date of such statements and balance
sheet, by the accountants who certified such statements and balance sheet,
stating in substance that they have reviewed this Agreement and that in making
the examination necessary for their certification of such statements and balance
sheet they did not become aware of any Event of Default or Potential Default,
or, if they did become so aware, such certificate or report shall state the
nature and period of existence thereof, and (ii) a certificate or report, dated
as of the date of such financial statements, by such accountants, stating in
reasonable detail the information and calculations necessary to establish
compliance with Sections 7.01, 7.05(f), 7.05(g), 7.06(d), 7.10(c), 7.10(d),
7.10(e) and 7.14 as of the end of such fiscal year.
(f) Forecast and Analysis. As soon as practicable, and in any event
---------------------
within thirty (30) days after the close of each fiscal year of the Borrower, the
Borrower shall furnish to the Administrative Agent, with a copy for each Bank, a
business plan for the Borrower and its Subsidiaries for the following year,
which business plan shall be in form and scope satisfactory to the Banks and
(without limitation) shall include projections of revenues and expenses (capital
or otherwise) of the Borrower and its Subsidiaries for such following year
(including for potential environmental obligations or liabilities (remedial,
<PAGE>
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compliance or other)). Such plan shall also include information (in form and
detail satisfactory to the Banks) concerning the anticipated scope of the
Borrower's and its Subsidiaries' potential environmental obligations or
liabilities for such year, the risks associated therewith, the Borrower's and
its Subsidiaries' potential indemnification claims with respect thereto and
similar matters.
(g) Other Reports and Information. Promptly upon their becoming
-----------------------------
available, the Borrower shall deliver to the Administrative Agent, with a copy
for each Bank, a copy of (i) all regular or special reports or effective
registration statements which the Borrower or any of its Subsidiaries shall file
with the Securities and Exchange Commission (or any successor thereto) or any
securities exchange, (ii) all reports, proxy statements, financial statements
and other information distributed by the Borrower or any of its Subsidiaries to
its stockholders, bondholders or the financial community in general, and (iii)
any reports submitted to the Borrower or any of its Subsidiaries by independent
accountants in connection with any annual, interim or special audit of the
Borrower or any of its Subsidiaries.
(h) Further Information. The Borrower shall promptly furnish to the
-------------------
Administrative Agent, with a copy for each Bank, such other information and in
such form as the Administrative Agent or any Bank may reasonably request.
(i) Notice of Event of Default. Promptly upon becoming aware of any
--------------------------
Event of Default or Potential Default, and, in any event, within five (5)
Business Days of so becoming aware, the Borrower shall give the Administrative
Agent notice thereof, together with a written statement of the President,
Treasurer or Chief Financial Officer of the Borrower setting forth the details
thereof and within ten (10) Business Days thereafter, notice of any action with
respect thereto taken or contemplated to be taken by the Borrower. The Borrower
shall be deemed to have become aware of an event described in this Section
6.01(i) at such time as its President, Treasurer or Chief Financial Officer
shall, or, in the exercise of reasonable diligence, should, have become aware
thereof.
(j) Notice of Material Adverse Change. Promptly upon becoming aware
---------------------------------
thereof, and in any event within five (5) Business Days of so becoming aware,
the Borrower shall give the Administrative Agent notice of any event or
circumstance which has, or would reasonably be expected to have, a Material
Adverse Effect. The Borrower shall be deemed to have become aware of an event
or circumstance of the type described in this Section 6.01(j) at such time as
its President, Treasurer or Chief Financial Officer shall, or, in the exercise
of reasonable diligence, should, have become aware thereof.
(k) Notice of Material Proceedings. Promptly upon becoming aware
------------------------------
thereof and, in any event, within five (5) Business Days of so becoming aware,
the Borrower shall
<PAGE>
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give the Administrative Agent notice of the commencement, existence or threat of
any proceeding by or before any Official Body against or affecting the Borrower
or any of its Subsidiaries which is reasonably possible to be adversely decided,
and which, if adversely decided, would have, or would reasonably be expected to
have, a Material Adverse Effect. Promptly upon commencing, or becoming aware of
the commencement of, any arbitration proceeding under Article XI of the
Acquisition Agreement, the Borrower shall give the Administrative Agent notice
thereof if the amount in controversy therein, singly or in the aggregate with
all other amounts then in controversy in all similar proceedings, shall exceed
$1,000,000.
(l) Notice of Pension-Related Events. In the event that the
--------------------------------
Borrower, any Controlled Group Member or any administrator of a Plan:
(i) receives the notification referred to in subsection (i), (iv) or
(vii) of Section 8.01(g);
(ii) has knowledge of (A) the occurrence of a Reportable Event with
respect to a Plan; (B) any event which has occurred or any action which has
been taken to amend or terminate a Plan as referred to in subsection (ii)
or (vi) of Section 8.01g); (C) any event which has occurred or any action
which has been taken which could result in complete withdrawal, partial
withdrawal or secondary liability for withdrawal liability payments with
respect to a Multiemployer Plan as referred to in subsection (vii) of
Section 8.01(g); (D) any action which has been taken in furtherance of, any
agreement which has been entered into for, or any petition which has been
filed with a United States District Court for, the appointment of a trustee
for a Plan as referred to in subsection (iii) of Section 8.01(g); (E) any
action to amend a Plan which requires security to be provided to the Plan
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (F) the
occurrence of any event, or existence of any condition, requiring the
provision of any notice or information to the PBGC or participants with
respect to any Plan under Section 4010 or Section 4011 of ERISA or (G) any
failure to pay the PBGC premium with respect to a Plan when due; or
(iii) files a notice of intent to terminate a Plan with the
Internal Revenue Service or the PBGC; or files with the Internal Revenue
Service a request pursuant to Section 412(d) or 412(e) of the Code for a
variance from the minimum funding standard or an extension of the period
for amortizing unfunded liabilities, respectively, for a Plan; or files a
return with the Internal Revenue Service with respect to the tax imposed
under Section 4971(a) of the Code for failure to meet the minimum funding
standards established under Section 412 of the Code for a Plan;
the Borrower shall promptly (and in any event within seven (7) days in the case
of a Reportable Event which is a failure to meet the minimum funding requirement
with respect
<PAGE>
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to a Plan, including failure to pay any contribution when due, and the total
unpaid balance of contributions due to such Plan exceeds $1,000,000) furnish to
the Administrative Agent (A) a copy of any notice received, request or petition
filed or agreement entered into; (B) the most recent Annual Report (Form 5500
Series) and attachments thereto for the Plan; (C) the most recent actuarial
report for the Plan; (D) any notice, return or materials required to be filed
with the Internal Revenue Service, the PBGC or Plan participants or
beneficiaries in connection with the event, action or filing; and (E) a written
statement of the President, Treasurer or Chief Financial Officer of the Borrower
describing the event or the action taken and the reasons therefor.
(m) Notice of Other Material Defaults. Promptly upon becoming aware
---------------------------------
of any default by the Borrower or any of its Subsidiaries under any agreement or
instrument to which the Borrower or any of its Subsidiaries is a party or by
which the Borrower or any of its Subsidiaries or any of their respective
properties may be subject or bound, the Borrower shall give the Administrative
Agent notice thereof, together with a written statement of the President,
Treasurer or Chief Financial Officer of the Borrower setting forth the details
thereof, if the consequence of such default has, or would reasonably be expected
to have, a Material Adverse Effect.
(n) Notice of Other Amendments. The Borrower shall promptly notify
--------------------------
the Administrative Agent of any amendment or supplement to, or extension or
renewal of, or waiver by any other party thereto of any right under or condition
of, Article VII of the Acquisition Agreement, the Acquisition Agreement
Guarantee, any of the Senior Note Documents or any of the Senior Subordinated
Note Documents. The Borrower shall provide the Administrative Agent with copies
of any reports, certificates or notices furnished to any other party to the
Acquisition Agreement, the Acquisition Agreement Guarantee, the Senior Note
Documents or the Senior Subordinated Note Documents pursuant to their terms or
to the terms of any such amendment or supplement, concurrently with the
Borrower's delivery of such report, certificate or notice to such other party.
(o) Visitation. The Borrower shall permit such persons as any Agent
----------
or any Bank may designate to visit and inspect, during normal business hours,
any of the properties of the Borrower or any of its Subsidiaries, to examine
their respective books and records and take copies and extracts therefrom, and
to discuss their respective affairs with their respective officers and employees
and independent accountants, engineers, consultants and contractors (each of
whom is hereby authorized to discuss with any Agent or any Bank the affairs of
the Borrower or its Subsidiaries) at such times and as often as any such Agent
or any Bank may reasonably request.
(p) Environmental Matters. (i) If an Event of Default shall occur,
---------------------
the Borrower shall permit such visitation by such persons ("Site Reviewers") as
the Collateral
<PAGE>
-101-
Agent may select in connection with the Collateral Agent's or the Banks'
consideration of enforcement or preservation of rights under this Agreement or
any of the Related Documents, to visit its properties and, in the case of the
Mortgaged Property, to perform such reasonable environmental site investigations
and assessments ("Site Assessments") thereon for the purpose of determining
whether there exists thereon any environmental condition which could result in
any liability, cost or expense to the owner or occupier thereof relating to
Hazardous Substances. Such Site Assessments may include both above and below the
ground testing for environmental damage or the presence of Hazardous Substances
and such other tests as, in the opinion of the Site Reviewers, are necessary to
conduct the Site Assessments. The Borrower shall supply to the Site Reviewers
such historical and operational information, including the results of all
samples sent for analysis, correspondence with Official Bodies and previous
environmental audits or environmental reviews as are within its possession,
custody or control or which are reasonably available to it and which may be
reasonably requested by the Site Reviewers to facilitate the Site Assessments,
and will make available for meetings with the Site Reviewers appropriate
personnel employed by the Borrower who have knowledge of such matters. The cost
of performing all Site Assessments shall be paid by the Borrower within five (5)
days after demand by the Collateral Agent, together, if such amount shall not
have been paid within such five (5) days, with interest thereon at the rate
specified in Section 2.06(e) from and after such fifth day until paid.
(ii) At such other times and places and as often as the Collateral
Agent may reasonably request, the Borrower shall make available to the
Collateral Agent or its representatives such historical and operational
information, including the results of all samples sent for analysis,
correspondence with Official Bodies, all environmental reviews conducted prior
to December 28, 1988 and all non-privileged environmental reviews conducted
after December 28, 1988 regarding its properties, as are within its possession,
custody or control or which are reasonably available to it and which may be
reasonably requested by the Collateral Agent or its representatives, and will
make available for meetings with the Collateral Agent or its representatives
appropriate personnel employed by the Borrower who have knowledge of such
matters.
6.02. Preservation of Existence and Franchises.
----------------------------------------
Subject to Section 7.09, the Borrower shall, and shall cause each of
its Subsidiaries to, maintain its corporate existence, rights and franchises in
full force and effect in its respective jurisdiction of incorporation. The
Borrower shall, and shall cause each of its Subsidiaries to, qualify and remain
qualified as a foreign corporation in each jurisdiction in which failure to
receive or retain such qualification would have, or would reasonably be expected
to have, a Material Adverse Effect.
<PAGE>
-102-
6.03. Insurance.
---------
The Borrower shall, and shall cause each of its Subsidiaries to,
maintain with financial sound and reputable insurers insurance with respect to
its properties and business and against such liabilities, casualties and
contingencies of such types and in such amounts as is satisfactory to the Banks
in their reasonable judgment and as is customary in the case of corporations
engaged in the same or a similar business or having similar properties similarly
situated, and in any event shall
(a) maintain in effect all such insurance with respect to the
Collateral as is required by the Security Documents;
(b) keep all its insurable properties insured against loss or damage
by fire, lightning, earthquake, flood, collapse, wind and hail, explosion,
smoke, riot, vandalism, civil commotion, aircraft and vehicles in amounts
sufficient to prevent the Borrower or such Subsidiary from becoming a
coinsurer within the terms of the policies in questions; and
(c) maintain in effect all such workers' compensation, disability
benefits and similar insurance as may be required under the laws of any
State or jurisdiction in which it may be engaged in business (provided that
such insurance may be effected through an insurance fund operated by such
State or other jurisdiction or by causing to be maintained a system or
systems of self-insurance which is in accord with applicable Laws).
The Borrower shall, if so requested by the Administrative Agent,
deliver to the Administrative Agent original or duplicate policies or
certificates of such insurance and, as often as the Administrative Agent may
reasonably request, a report of a reputable insurance broker, or an insurance
company representative if an insurance broker is not involved, with respect to
such insurance.
6.04. Maintenance of Properties.
-------------------------
(a) The Borrower shall, and shall cause each of its Subsidiaries to,
maintain or cause to be maintained in good repair, working order and condition
such properties now or hereafter owned, leased or otherwise possessed by it,
failure to maintain which would have, or would reasonably be expected to have a
Material Adverse Effect, and shall make or cause to be made all needful and
proper repairs, renewals, replacements and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
<PAGE>
-103-
(b) The Borrower shall, and shall cause each of its Subsidiaries to,
maintain or cause to be maintained in full force and effect all patents, patent
applications, trademarks, service marks and applications therefor, trade names,
copyrights and all other intellectual property rights now or hereafter owned, or
otherwise possessed by it, failure to maintain which would have, or would
reasonably be expected to have, a Material Adverse Effect.
6.05. Payment of Taxes and Other Potential Charges and
Priority Claims; Payment of Other Current Liabilities.
-----------------------------------------------------
The Borrower shall, and shall cause each its Subsidiaries to, pay or
discharge
(a) on or prior to the date on which penalties attach thereto, all
taxes, assessments and other governmental charges or levies imposed upon it
or any of its properties or income (including such as may arise under
Section 4062, Section 4063 or Section 4064 of ERISA, or any similar
provision of Law);
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid, might result in the creation of a Lien upon any
such property; and
(c) on or prior to the date when due, all other lawful claims which,
if unpaid, might result in the creation of a Lien upon any such property
(other than Permitted Liens) or which, if unpaid, might give rise to a
claim entitled to priority over general creditors of the Borrower or such
Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code,
as amended, or in any insolvency proceeding or dissolution or winding-up
involving the Borrower or such Subsidiary;
provided that, unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, the Borrower or such Subsidiary need not
pay or discharge any such tax, assessment, charge, levy, claim or current
liability so long as the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted, and so long as such reserves or
other appropriate provisions as may be required by GAAP shall have been made
therefor, and so long as such failure to pay or discharge does not have, and
would not reasonably be expected to have, a Material Adverse Effect. The
Borrower shall promptly notify the Administrative Agent in writing if it or any
of its Subsidiaries learns of any material proposed additional assessment or
basis for any material assessment for additional taxes (whether or not reserved
against).
<PAGE>
-104-
6.06. Financial Accounting Practices.
------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to, make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets, and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization, and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
6.07. Compliance with Laws.
--------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
comply with all applicable Laws (including ERISA, the Code and any applicable
tax Law, product safety Law, occupational safety or human health, safety or
welfare Law, environmental protection or pollution control Law and hazardous
waste or toxic substances management, handling or disposal Law) in all respects
(including compliance in respect of products that it manufactures, processes or
sells or services it performs, conduct of its business or use, maintenance or
operation of real and personal properties owned or possessed by it); provided
that the Borrower shall not be deemed to be in violation of this Section 6.07 as
a result of any failures to comply which do not result in fines, penalties,
injunctive relief or other civil or criminal liabilities which, in the
aggregate, would have, or would reasonably be expected to have, a Material
Adverse Effect.
6.08. Use of Credits.
--------------
The Borrower shall use or apply the proceeds of all Loans and all
Letters of Credit and the proceeds thereof only as provided in (and not in any
manner inconsistent with) this Agreement).
6.09. Official Authorizations, etc.
----------------------------
The Borrower shall, and shall cause each of its Subsidiaries to, at
all times obtain and maintain in full force and effect all Official
Authorizations required by this Agreement or the Related Documents or otherwise
necessary or advisable in connection with execution and delivery of this
Agreement or the Related Documents, consummation of the transactions herein or
therein contemplated, performance of or compliance with the terms and
<PAGE>
-105-
conditions hereof or thereof or to ensure the legality, validity, enforceability
and admissibility in evidence hereof or thereof.
6.10. Contracts.
---------
The Borrower shall, and shall cause each of its Subsidiaries to,
comply with all agreements or instruments to which it is a party or by which it
or any of its respective properties may be subject or bound; provided that the
Borrower shall not be deemed to be in violation of this Section 6.10 as a result
of any failure to comply which does not have, and would not reasonably be
expected to have, a Material Adverse Effect.
6.11. Maintenance of Liens of the Security Documents.
----------------------------------------------
The Borrower shall, at its expense, promptly, execute, acknowledge and
deliver, or cause the execution, acknowledgment and delivery of, and thereafter
register, file or record, or cause to be registered, filed or recorded, in any
appropriate governmental office, any document or instrument supplemental to or
confirmatory of the Security Documents which may be necessary or desirable for
the continued validity, perfection or priority of the Liens on the Collateral
covered thereby.
6.12. Environmental Matters.
---------------------
(a) Hazardous Substances. Except with respect to those acts,
--------------------
omissions, conditions or circumstances which result or may result in "Pre-
Closing Environmental Claims" or "Pre-Closing Environmental Cleanup Liability"
as defined in the Acquisition Agreement, the Borrower shall use all reasonable
efforts to prevent the deposit, emission, discharge or release by Borrower of
any Hazardous Substances on its properties, unless such deposit, emission,
discharge or release is authorized by, and in full compliance with (including by
the giving of all necessary financial assurances) a duly issued permit, license,
authorization or other approval of an Official Body or is otherwise done in
compliance with Environmental Laws. In addition to the reporting requirements
in Section 6.01, the Borrower shall notify the Administrative Agent promptly
upon becoming aware, and in any event within five (5) Business Days thereafter,
of any spill, discharge or release of a Hazardous Substance in excess of any
reportable quantity or of any other significant or material environmental event,
circumstance or condition relating to its properties. The Borrower shall use
its best efforts to handle, store, transport and dispose of all Hazardous
Substances generated by it on its properties in compliance with all applicable
Law now or hereafter enacted, and the Borrower shall use its best efforts to
promptly clean up any accidental deposit, emission, discharge or release of
Hazardous Substances, pollutants or contaminants from or on any of its
properties in accordance with applicable Law. The
<PAGE>
-106-
Borrower shall pay, collect or remit, as appropriate, in a timely manner, all
fees imposed by any Official Body which may be incurred by it as a result of the
handling, storage, collection, treatment or disposal of solid wastes or
Hazardous Substances.
(b) Financial Assurance. Except as otherwise provided in Section
-------------------
7.02(a)(ii) or (b) of the Acquisition Agreement, the Borrower shall at all times
maintain and keep in effect appropriate financial assurances, bonds or other
financial security or liability insurance required by any Official Body to be
kept as conditions of any permits, licenses, authorization or other approvals
necessary (i) to permit the Borrower to operate pollution control equipment;
(ii) to close facilities which handled, stored, treated or disposed of Hazardous
Substances and to provide for post-closure care of the same; (iii) to undertake
any cleanup or remediation of areas on any of its properties in or on which
Hazardous Substances were or are generated, handled, stored, treated or disposed
of; or (iv) otherwise required by any Official Body as a condition of the
Borrower's operation of all or any part of its properties.
(c) Indemnification. The Borrower hereby indemnifies and agrees to
---------------
defend the Bank Parties from and against, and hold the Bank Parties harmless
from, any and all liability, obligation, loss or damage which such Bank Party
may or might incur by reason of the Liens granted pursuant to the Security
Documents or arising from or relating to the existence of Hazardous Substances
on any of the Borrower's properties (including the Mortgaged Property) or
arising from or relating to acts, omissions, conditions or circumstances covered
under Article VII of the Acquisition Agreement; provided that the Borrower shall
not be liable for any such liability, obligation, loss or damage to the extent
that the same shall result from the gross negligence or willful misconduct, as
finally determined by a court of competent jurisdiction, of the person seeking
to be indemnified.
6.13. Annual Bank Meeting.
-------------------
The Borrower shall hold an annual bank meeting at the request of the
Agents or the Required Banks.
6.14. Additional Credit Parties.
-------------------------
In the event that any person becomes a Significant Subsidiary,
directly or indirectly, of the Borrower after the Closing Date (each such
Significant Subsidiary referred to herein as an "Additional Credit Party" and
collectively as the "Additional Credit Parties"), then, promptly after such
person becomes a Significant Subsidiary of the Borrower, the Borrower shall
notify the Administrative Agent and the Collateral Agent and shall cause such
Significant Subsidiary to execute and deliver all such agreements, guarantees,
pledges, assignments, documents and certificates (including any amendments to
the Related Documents) as the Administrative Agent or the Collateral Agent may
request and do such
<PAGE>
-107-
other acts and things as the Administrative Agent or the Collateral Agent may
request in order to have such Significant Subsidiary guarantee the Obligations
and grant to the Collateral Agent ratably on behalf of the Banks, a duly
perfected Lien (subject to no Liens other than Permitted Liens and Liens
expressly permitted by the applicable Security Documents) on all real property
and personal property of such Significant Subsidiary and effect fully the
purposes of this Agreement and the other Related Documents and to provide for
payment of the Obligations in accordance with the terms of this Agreement and
the other Related Documents. Without limiting the generality of the foregoing,
in such event, such Additional Credit Party shall execute and deliver to the
Administrative Agent or the Collateral Agent, as appropriate, all Security
Documents as the Administrative Agent or the Collateral Agent may deem necessary
or appropriate to grant the Collateral Agent a security interest in all property
of such Additional Credit Party that would have constituted Collateral if such
Significant Subsidiary were a Credit Party on the Closing Date. For the purposes
of this Section 6.14, KAP Investments Inc. will be deemed to become a
Significant Subsidiary (and shall no longer be an Unrestricted Subsidiary) on
May 31, 1998 unless the Borrower shall have acquired and retired to treasury all
capital stock of the Borrower owned by KAP Investments Inc. prior to such date.
6.15. Certain Post-Closing Deliveries.
-------------------------------
Notwithstanding the provisions of subsections 5.01(xi) and 5.01 (xii),
the Borrower shall (i) use best efforts to cause the landlords of the leased
real properties of the Borrower listed on Schedule 4.11 that are not subject to
a Mortgage to deliver lien waiver and collateral access agreements, in form and
substance reasonably satisfactory to the Administrative Agent and the Collateral
Agent, and (ii) deliver or cause to be delivered to the Collateral Agent within
30 days following the Closing Date effective title insurance policies with
respect to Mortgages for which the Borrower has provided written evidence to the
Collateral Agent that Borrower has requested a title insurance commitment prior
to the date of this Agreement but for which the title company has not produced a
title insurance commitment as of the Closing Date.
ARTICLE VII.
NEGATIVE COVENANTS
------------------
The Borrower covenants to the Banks as follows:
7.01. Financial Maintenance Covenants.
-------------------------------
<PAGE>
-108-
(a) Net Worth. Consolidated Net Worth shall not, at any time on or
---------
after December 31, 1997, be less than the sum of ($40,000,000), plus the amount
of write offs identified on Schedule 7.01, to the extent not actually taken in
the fiscal quarter ending December 31, 1997, plus 50% of cumulative Consolidated
Net Income from January 1, 1998 plus 100% of the proceeds (net of underwriting
discounts and commissions and other costs and expenses directly associated
therewith) from the sale after the Closing Date of equity securities of the
Borrower in any public offering or private placement or from a capital
contribution from any person; provided that no adjustment shall be made for any
period in which the Borrower has negative Consolidated Net Income.
(b) Debt/Consolidated EBITDA. The Performance Ratio shall at no time
------------------------
exceed the ratio specified below for periods through September 30 of the years
indicated below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 and thereafter
- ----- ---- ---- ---- ---- ---- -------------------
4.80x 4.50x 4.50x 4.00x 3.75x 3.75x 3.50x
</TABLE>
(c) Interest Coverage Ratio. The Interest Coverage Ratio at the end
-----------------------
of any fiscal quarter for periods through September 30 of the years set forth
below shall not be less than the amounts set forth below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 and thereafter
- ----- ---- ---- ---- ---- ---- -------------------
2.25x 2.50x 2.75x 3.00x 3.00x 3.00x 3.00x
</TABLE>
(d) Consolidated Debt Service Coverage Ratio. The Consolidated Debt
----------------------------------------
Service Coverage Ratio at the end of any fiscal quarter for periods through
September 30 of the years set forth below shall not be less than the amounts set
forth below.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1998 1999 2000 2001 2002 2003 2004 and thereafter
- ----- ---- ---- ---- ---- ---- -------------------
1.75x 1.75x 1.75x 1.75x 1.75x 1.75x 1.25x
</TABLE>
(e) Current Ratio. The Consolidated Current Ratio at the end of any
-------------
fiscal quarter shall not be less than 1.10x.
7.02. Liens.
-----
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, at any time create, incur, assume or suffer to exist any Lien
on any of its property or assets, or agree, become or remain liable
(contingently or otherwise) to do any of the foregoing, except for the following
("Permitted Liens"):
(a) Liens existing on the date hereof and listed on Schedule 7.02
(and extension, renewal and replacement Liens upon the same property
theretofore subject to a listed Lien in an aggregate amount not exceeding
$500,000; provided that the
<PAGE>
-109-
amount secured by each Lien constituting such an extension, renewal or
replacement Lien shall not exceed the amount secured by the Lien
theretofore existing);
(b) Liens arising from taxes, assessments, charges, levies or claims
described in Section 6.05(a) or (b) that are not yet due or that remain
payable without penalty or are otherwise permitted to remain unpaid under
the proviso to such Section 6.05;
(c) Deposits or pledges to secure workers' compensation, unemployment
insurance or other social security obligations, or in connection with or to
secure the performance of bids, tenders, trade contracts or leases, or to
secure statutory obligations, or stay, surety or appeal bonds, or other
pledges or deposits of like nature, all in the ordinary course of business;
(d) Zoning restrictions, easements, minor restrictions on the use of
real property, minor irregularities in title thereto and other minor Liens
that do not secure the payment of money or the performance of an obligation
and that do not in the aggregate materially detract from the value of a
property or asset to, or materially impair its use in the business of, the
Borrower or such Subsidiary;
(e) Liens of the Security Documents and Liens on properties subject
to the Security Documents to the extent permitted by the Security
Documents;
(f) Liens on property securing all or part of the purchase price
thereof and Liens (whether or not assumed) existing on property at the time
of purchase thereof'
provided that:
(i) such Lien is created before or substantially simultaneously
with the purchase of such property in the ordinary course of business of
the Borrower or such Subsidiary (or is a Lien securing successor
obligations incurred to extend or refinance predecessor obligations allowed
under this Section 7.02(f); provided that in each case the successor
obligation is an obligation of the same person subject to the predecessor
obligation, is not greater than (and is not otherwise on terms less
advantageous than) the predecessor obligation, and the Lien securing the
successor obligation does not extend to any property other than that
subject to the Lien securing the predecessor obligation);
(ii) such Lien is confined solely to the property so purchased,
improvements thereto and proceeds thereof;
<PAGE>
-110-
(iii) the aggregate amount secured by all such Liens on any
particular property at the time purchased by the Borrower or such
Subsidiary, as the case may be, does not exceed the lesser of the purchase
price of such property or the fair market value of such property at the
time of purchase thereof ("purchase price" for this purpose including the
amount secured by each such Lien thereon whether or not assumed); and
(iv) the obligation secured by such Lien is Indebtedness permitted
under Section 7.03(h) or Indebtedness incurred by KAP or any of its
Consolidated Subsidiaries in connection with the purchase of goods in the
ordinary course of business;
(g) Government Loan Liens;
(h) judgment Liens in existence for less than sixty (60) days after
the entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to customary deductibles) by
insurance; and
(i) Liens securing obligations under Interest Rate Agreements and
Currency Agreements.
Notwithstanding the foregoing, "Permitted Lien" shall in no event
include any Lien imposed by, or required to be granted pursuant to, ERISA, the
Code or any human health, safety or welfare Law or environmental Law.
7.03. Indebtedness.
------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, at any time, create, incur, assume or suffer to exist any
Indebtedness, or agree, become or remain liable (contingently or otherwise) to
do any of the foregoing, except for the following ("Permitted Indebtedness"):
(a) Indebtedness under this Agreement and the Related Documents;
(b) Indebtedness existing on the Closing Date and listed on Schedule
7.03 (and extensions, renewals and replacements thereof on terms no less
advantageous than the Indebtedness extended, renewed or replaced);
(c) current accounts payable to trade creditors on ordinary and
customary trade terms and arising out of transactions (other than
borrowings) in the ordinary course of business;
<PAGE>
-111-
(d) Indebtedness of the Borrower under the Senior Notes in an
aggregate principal amount not to exceed $15,000,000;
(e) Indebtedness of the Borrower and the Guarantors under the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$175,000,000;
(f) Permitted Liens;
(g) Government Loans;
(h) other Indebtedness (including Indebtedness secured by purchase
money Liens described in Section 7.02(f) on property used in the ordinary
course of business of the Borrower or such Subsidiary) in an aggregate
amount not exceeding $10,000,000 at any time outstanding;
(i) Indebtedness of a Credit Party owing to any other Credit Party;
provided that each such Credit Party is either the Borrower or a
Significant Subsidiary of the Borrower and has delivered such Security
Documents and other agreements, guarantees, pledges, assignments, documents
and certificates and performed such other acts contemplated by Section
6.14; and
(j) Indebtedness under Interest Rate Agreements and Currency
Agreements.
7.04. Guaranty Equivalents.
--------------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, at any time directly or indirectly be or become subject to or
bound by any Guaranty Equivalent, except for the following:
(a) obligations under or in respect of this Agreement and the Related
Documents;
(b) contingent liabilities arising from the endorsement of negotiable
or other instruments for deposit or collection or similar transactions in
the ordinary course of business;
(c) indemnifications by the Borrower or any of its Consolidated
Subsidiaries of the liabilities of its directors or officers pursuant to
provisions contained in its respective articles of incorporation or bylaws
as in effect on the date hereof or as otherwise permitted by applicable
Law;
<PAGE>
-112-
(d) indemnifications in favor of the initial purchasers of the Senior
Subordinated Notes as set forth in the Senior Subordinated Note Purchase
Agreement, indemnifications in favor of the holders of Senior Subordinated
Notes as set forth in the Senior Subordinated Note Registration Rights
Agreement and other ordinary and customary indemnifications of underwriters
in connection with other permitted public offerings of the Borrower's
securities;
(e) indemnifications with respect to surety bonds and other similar
obligations in connection with contracts for the sale of goods or
performance of services in the ordinary course of business;
(f) guarantees and contingent liabilities existing on the date hereof
and listed on Schedule 7.04 (and extensions, renewals and replacements
thereof on terms no more burdensome than the guarantee or contingent
liability extended, renewed or replaced);
(g) other Guaranty Equivalents; provided that the aggregate principal
amount of all such other Guaranty Equivalents pursuant to this Section
7.04(g) shall not exceed $10,000,000 at any time outstanding;
(h) to the extent not covered in (d) above, indemnifications provided
by the Borrower and its Consolidated Subsidiaries to those other persons
who are parties to the Transaction Documents; and
(i) reasonable indemnifications in connection with the sale of the
Monessen Section 29 Tax Credits.
7.05. Loans and Investments.
---------------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, at any time make or suffer to exist or remain outstanding any
loan, advance or other extension of credit to, or purchase, acquire or own
(beneficially or of record) any stocks, bonds, notes or securities of, or any
partnership interests (whether general or limited) in, or any other debt or
equity interest in, or make any capital contribution to or other investment in,
any other person, or agree, become or remain liable to do any of the foregoing,
except for the following:
(a) loans and investments existing on the date hereof and listed on
Schedule 7.05 (including any extensions or renewals thereof);
<PAGE>
-113-
(b) trade credit extended, and loans and advances extended to
subcontractors or suppliers, under usual and customary terms in the
ordinary course of business;
(c) advances to employees to allow such employees to meet expenses
incurred in the ordinary course of business;
(d) (i) demand deposits, time deposits, certificates of deposit in or
loans to or secured or guaranteed by United States commercial banks or the
Commonwealth of Australia or an Australian bank authorized under the
Banking Act of 1959 or a bank constituted under the legislation of any
State of the Commonwealth of Australia, in the case of any bank having
shareholders' equity of at least $100,000,000, and in any case, maturing
not in excess of one year from the date of acquisition, (ii) obligations
backed by the full faith and credit of the United States of America or the
Commonwealth of Australia maturing not in excess of one year from the date
of acquisition, and (iii) commercial paper maturing not in excess of 180
days from the date of acquisition and rated P-1 by Moody's or A-1 by S&P or
their respective Australian affiliates on the date of acquisition; provided
that the aggregate amount invested pursuant to this subsection (d) shall
not exceed $20,000,000 at any one time;
(e) an investment consisting of the contribution of the Monessen
Facility to a partnership or other entity created for the purpose of
effecting the sale of the Monessen Section 29 Tax Credits; provided that
the Borrower shall be the general partner (or equivalent) of such entity,
an Affiliate of the Borrower shall continue to operate the Monessen
Facility, such contribution shall be credited to the Borrower's capital
account (or equivalent) of such entity at the fair market value of the
Monessen Facility and the other investor's interest in such entity shall be
redeemable by the Borrower following expiration of the Monessen Section 29
Tax Credits;
(f) investments in joint ventures in which no other person has a
beneficial ownership interest greater than the beneficial ownership
interest of the Borrower in an aggregate amount not exceeding $2,500,000 at
any time outstanding; provided that the person in which such investment is
made is engaged primarily in a business which is the same as, or
substantially similar or incidental to, a business in which the Borrower is
substantially engaged on and as of the date hereof; and provided, further,
that, at the time of such investment, both immediately before and
immediately after giving effect thereto, no Event of Default or Potential
Default shall have occurred and be continuing or shall exist; and
(g) investments in capital assets or wholly-owned Subsidiaries (or
persons who become wholly-owned Subsidiaries as a result of such
investment) in a cumulative aggregate amount not to exceed $15,000,000
through the termination of this
<PAGE>
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Agreement; provided that the person in which such investment is made is
engaged primarily in a business which is the same as, or substantially
similar or incidental to, a business in which the Borrower is substantially
engaged on and as of the date hereof; and provided, further, that, at the
time of such investment, both immediately before and immediately after
giving effect thereto, no Event of Default or Potential Default shall have
occurred and be continuing or shall exist.
7.06. Dividends and Related Distributions.
-----------------------------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, declare, make or pay any Stock Payment, or agree, become or
remain liable (contingently or otherwise) to do any of the foregoing, except for
the following:
(a) A wholly-owned Consolidated Subsidiary of the Borrower may
declare and make Stock Payments if the capital stock of such wholly-owned
Consolidated Subsidiary is owned by the Borrower or by a direct or indirect
wholly-owned Consolidated Subsidiary of the Borrower;
(b) The Borrower may from time to time declare and make Stock
Payments if such Stock Payment is payable solely in shares of capital stock
(or options, warrants or other rights therefor) of the Borrower, and a
Consolidated Subsidiary of the Borrower may declare and make Stock Payments
if such Stock Payment is payable solely in shares of capital stock (or
warrants, options or other rights therefor) of such Subsidiary; provided,
however, that no shares of capital stock (or options, warrants or other
rights therefor) may be issued pursuant to this Section 7.06(b) if such
capital stock is subject, in whole or in part, to mandatory redemption or
redemption at the option of the holder thereof, or convertible into or
exchangeable for any capital stock subject to such redemption;
(c) (i) The APT Post-Transaction Repurchase and the Management Stock
Repurchase provided that, on the date of such repurchase, or immediately
thereafter and after giving effect thereto, no Event of Default or
Potential Default shall have occurred and be continuing or shall exist; and
(ii) Retiring Employee Stock Repurchases; provided that, on the date
of such repurchase, or immediately thereafter and after giving effect
thereto, no Event of Default or Potential Default shall have occurred and
be continuing or shall exist; and
(d) Other Stock Payments not more than one time in any fiscal year
and in no event prior to 30 days following the receipt by the
Administrative Agent of the reports specified in Section 6.01(a), (x) up to
an amount equal to the lesser of (p) $5,000,000
<PAGE>
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or (q) 50% of Consolidated Net Income for the prior fiscal year (which, for
the fiscal year ending December 31, 1997, shall not give effect to write
offs identified on Schedule 7.01 to the extent actually taken in the fiscal
quarter ending December 31, 1997), or (y) if the Performance Ratio shall be
less than 2.5x for two consecutive fiscal quarters, up to an amount equal
to 50% of Consolidated Net Income for the prior fiscal year; provided, that
on the date of declaration, payment or repurchase thereof, or immediately
thereafter and after giving effect thereto, no Event of Default or
Potential Default shall have occurred and be continuing or shall exist;
provided, further, that Stock Payments permitted pursuant to this
subsection 7.06(d) but not made during any fiscal year may be carried
forward and applied in any future fiscal year subject to compliance with
the other provisions of this subsection 7.06(d); provided, further, that
promptly following any such Stock Payment permitted pursuant to this
subsection 7.06(d), the Borrower shall provide written notice of such Stock
Payment, including reasonable detail as to nature and amount, to the
Administrative Agent.
7.07. Limitation on Optional Payments and
Modification of Certain Debt Instruments.
----------------------------------------
So long as any Commitment remains outstanding, or any portion of any
Revolving Credit Loan or any Swingline Loan remains unpaid, or any Letter of
Credit remains outstanding, or any other Obligation remains unpaid or
undischarged, the Borrower shall not, and shall not permit any of its
Consolidated Subsidiaries to, (a) pay, prepay, purchase, redeem, retire, defease
or otherwise acquire, or otherwise make any payment (on account of principal,
interest, premium or otherwise) of, any obligation under or evidenced by the
Senior Subordinated Notes or the Senior Subordinated Note Indenture, except that
the Borrower may make regularly scheduled payments of interest on the Senior
Subordinated Notes as contemplated by the Senior Subordinated Notes and the
Senior Subordinated Note Indenture; or (b) modify or change, or consent or agree
to any amendment or modification or change to, any of the terms of the Senior
Subordinated Notes or the Senior Subordinated Note Indenture (other than any
such amendment, modification or change which would only extend the maturity or
reduce the amount of any payment of principal of the Senior Subordinated Notes
or which would only reduce the rate or extend the date for payment of interest
thereon).
7.08. Leases.
------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, at any time enter into or suffer to remain in effect any
agreement to lease, any real or personal property, except for the following:
<PAGE>
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(a) leases existing on the date hereof and listed on Schedule 7.08
(and any extensions, replacements or renewals thereof);
(b) operating leases of computer equipment, data processing
equipment, office equipment, transportation equipment or other movable
equipment or office space, in each case used by the lessee in the ordinary
course of business; provided that no such lease shall have a term longer
than the greater of seven years or 75% of the useful economic life of the
property or asset subject to such lease;
(c) leases by the Borrower as lessor to a Consolidated Subsidiary as
lessee or by a Consolidated Subsidiary as lessor to the Borrower as lessee;
and
(d) other leases to the extent that the aggregate rental obligations
of the Borrower and its Consolidated Subsidiaries with respect to such
other leases does not exceed $3,000,000 in any fiscal year.
7.09. Fundamental Changes.
-------------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, enter into any transaction of acquisition (including, but not
limited to, the acquisition of equity interests in any person and the
acquisition of capital assets other than to the extent permitted by Section
7.14) or merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of its
business, property or assets, or make any material change in the present method
of conducting business, or agree to do any of the foregoing, except that, if no
Event of Default or Potential Default shall occur and be continuing or shall
exist or immediately thereafter and after giving effect thereto will exist, so
long as none of the Obligations or Liens created by or under this Agreement or
any of the Related Documents is impaired thereby:
(a) any Consolidated Subsidiary of the Borrower may be merged or
consolidated with or into the Borrower (provided, that the Borrower shall
be the continuing or surviving corporation) or with or into any one or more
wholly-owned Consolidated Subsidiaries of the Borrower (provided that a
wholly-owned Consolidated Subsidiary of the Borrower shall be the
continuing or surviving corporation);
(b) any wholly-owned Consolidated Subsidiary of the Borrower may
sell, lease, transfer or otherwise dispose of any or all of its property or
assets (upon voluntary liquidation or otherwise) to the Borrower or another
wholly-owned Consolidated Subsidiary of the Borrower; and
<PAGE>
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(c) investments permitted by Section 7.05(f) or (g).
7.10. Dispositions of Assets.
----------------------
The Borrower shall not, and shall not permit any of its Consolidated
Subsidiaries to, directly or indirectly, voluntarily or involuntarily, sell
convey, assign, lease, abandon or otherwise transfer or dispose of (any of the
foregoing being referred to in this Section 7.10 as an "Asset Disposition" and
any series of related Asset Dispositions constituting but a single Asset
Disposition), any of its property or assets (including sale, assignment,
discount or other disposition of accounts, contract rights, chattel paper or
general intangibles, with or without recourse), or agree, become or remain
liable (contingently or otherwise) to do any of the foregoing, except for the
following:
(a) Asset Dispositions (including transfers of obsolete or worn out
property and the sale of inventory) in the ordinary course of business and
Asset Dispositions consisting of casualty losses to the extent the
insurance proceeds resulting therefrom are applied to repair or replace the
affected assets and condemnations to the extent the proceeds resulting
therefrom are applied to acquire equivalent assets;
(b) Asset Dispositions between Guarantors;
(c) Asset Dispositions not described in Section 7.10(a), (b), (d) or
(e), up to a maximum aggregate book value of $20,000,000, at the fair
market value thereof; provided (i) 80% of the consideration received is in
immediate exchange for cash (with any note or other obligation that is
immediately converted into cash being deemed to be cash in the amount so
converted); (ii) if at any time the aggregate fair market value of all
assets disposed of pursuant to this Section 7.10(c), the proceeds of which
have not been applied in accordance with Section 2.05(c)(i)(A) or
reinvested as provided below, shall exceed $5,000,000, on the date of the
closing thereof, the Borrower shall apply the Net Cash Proceeds of such
asset disposition to make a prepayment in accordance with Section
2.05(c)(i)(A) unless (A) to the extent that the Borrower shall intend to
(and, within sixty (60) days after the closing of such transaction, shall)
reinvest such proceeds in Permitted Asset Disposition Proceeds
Reinvestments, the Borrower shall not be required to make such prepayment
(and the Borrower hereby further agrees that, in the event that it shall
make any disposition of assets in accordance with the foregoing, which
assets constitute Collateral, and it shall be required to make any
reinvestment of the proceeds thereof as aforesaid, it shall make such
reinvestment only in assets which would also constitute Collateral, and it
shall also execute such documents and instruments and take such other or
further actions as the Collateral Agent may reasonably request in order to
create or perfect a
<PAGE>
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Lien thereon in favor of the Collateral Agent for the benefit of the Bank
Parties); and (B) to the extent that a reinvestment of the type
contemplated by the preceding clause (A) shall not have occurred within
sixty (60) days after the closing of such transaction, then the Borrower
shall make such prepayment within five Business Days thereafter and
otherwise in accordance with Section 2.05(c)(i)(A); and (iii) on the date
of the consummation of each Asset Disposition of the type contemplated by
this Section 7.10(c), the Borrower shall provide the Administrative Agent
with written notice thereof;
(d) An Asset Disposition consisting of the sale, transfer, carryover,
lease or other disposition of the Monessen Facility; provided, that the Net
Cash Proceeds of any transaction pursuant to this Section 7.10(d) shall be
applied in accordance with Section 2.05(c)(i)(A); and
(e) upon request and with the consent of the Required Banks (such
consent not to be unreasonably withheld), other sales, conveyances,
assignments or other transfers or dispositions of property or assets at
fair market value; provided, that the Net Cash Proceeds of all transactions
pursuant to this Section 7.10(e) shall be applied in accordance with
Section 2.05(c)(i)(A).
Upon request of the Borrower, the Collateral Agent (acting on behalf
of all the Bank Parties) shall execute and deliver such instruments and
documents (including releases of Liens) as the Borrower may reasonably request
in order to permit the Borrower to consummate any of the transactions
contemplated by subsections (a) through (d) of this Section 7.10.
7.11. Disposition of Stock in and Indebtedness of Subsidiaries.
--------------------------------------------------------
The Borrower shall not directly or indirectly sell or otherwise
dispose of, or part with control of, any shares of the capital stock of any of
its Subsidiaries or any Indebtedness of any of its Consolidated Subsidiaries,
and shall not permit any of its Subsidiaries directly or indirectly to issue,
sell or otherwise dispose of, or part with control of, any shares of the capital
stock of itself or any of its Subsidiaries or permit any of its Consolidated
Subsidiaries directly or indirectly to issue, sell or otherwise dispose of, or
part with control of, any Indebtedness of itself or any of its Consolidated
Subsidiaries ("indirect" disposition or issuance of shares of capital stock
including disposition or issuance of options, warrants, calls, subscriptions,
conversion rights, exchange rights, preemptive rights or other rights,
agreements or arrangements (contingent or other) with respect to such shares),
except
(a) the Borrower and its Consolidated Subsidiaries may incur or
suffer to remain outstanding Indebtedness to the extent not prohibited by
Section 7.03; and
<PAGE>
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(b) the Borrower and its Subsidiaries may issue and dispose of shares
of its own capital stock pursuant to a transaction not prohibited by
Section 7.06.
7.12. Transactions with Affiliates.
----------------------------
The Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, enter into or carry out any transaction with
(including purchase property or services from or sell property or services, to,
make any loan or advance to, or enter into, permit to remain in existence or
amend, any contract, agreement or arrangement with) any Affiliate of the
Borrower, or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing, except for those set forth on Schedule 7.12 and the
following:
(a) directors, officers and employees of the Borrower and its
Subsidiaries may render services to the Borrower or such Subsidiary for
compensation at the same rates generally paid by corporations engaged in
the same or similar businesses for the same or similar services;
(b) the Borrower and its Subsidiaries may enter into and carry out
other transactions with its Affiliates in the ordinary course of business
consistent with the past practices of the Borrower, pursuant to the
reasonable requirements of the Borrower's, or such Subsidiary's, business,
upon terms reasonably found by a majority of the disinterested members of
the board of directors of the Borrower and such Subsidiary, after due
inquiry, to be fair and reasonable and no less favorable to the Borrower or
such Subsidiary than would obtain in a comparable arm's-length transaction;
provided that with respect to any transaction or series of related
transactions the aggregate amount of which is in excess of $10,000,000,
other than a transaction of the type contemplated by Section 7.03(i), in
addition to approval of its board of directors, the Borrower will obtain a
written opinion of an Independent Financial Advisor stating that the terms
of such transaction are fair to the Borrower or its Subsidiary, as the case
may be, from a financial point of view; and
(c) the Borrower may enter into the Advisory Services Agreement and
may continue to perform its obligations pursuant to Sections 3(b), 4 and 5
thereunder to the extent that such advisory fees payable by the Borrower
thereunder are treated by the Borrower as an operating expense for purposes
of the calculation of Consolidated EBITDA for the purposes of this
Agreement.
7.13. Continuation of or Change in Business.
-------------------------------------
The Borrower shall, and shall cause each of its Subsidiaries to,
engage in the business they have engaged in and substantially as engaged in
during the present and
<PAGE>
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preceding fiscal years, and the Borrower shall not, and shall not permit any of
its Subsidiaries to, engage in any unrelated line of business.
7.14. Capital Expenditures.
--------------------
The Borrower and its Consolidated Subsidiaries shall not make any
capital expenditures, directly or indirectly, for cash or other consideration,
in any fiscal year which, in the aggregate, exceed $35,000,000; provided that
the amount of capital expenditures permitted in any calendar year may be
increased by an amount not to exceed 50% of the previous year's permitted
capital expenditures to the extent such amounts were not expended in such
previous year; provided, further, that all capital expenditures made pursuant to
this Section 7.14 shall be in the ordinary course of business.
7.15. Consolidated Tax Returns.
------------------------
The Borrower shall not file, or consent to the filing of, any
consolidated income tax return with any person other than its Subsidiaries.
7.16. Regulation U.
------------
The Borrower shall not use any Letter of Credit or any Loan or the
proceeds of any thereof directly or indirectly to purchase or carry any "margin
stock" (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve system) or to extend credit to others for the purpose of
purchasing or carrying, directly or indirectly, any such margin stock.
7.17. Certain Documents.
-----------------
The Borrower shall not (a) amend its articles of incorporation or
bylaws, each as in effect on the date hereof, in any way adverse to the
interests of the Bank Parties, or (b) amend, waive or release, or agree to the
amendment, waiver or release, of Article VII of the Acquisition Agreement or of
any term or provision of the Acquisition Agreement Guarantee, (c) amend any
provision of the Australian Credit Facilities, (d) amend Section 3(b) of the
Advisory Services Agreement or (e) amend, waive or release, or agree to the
amendment, waiver or release of the Stockholders' Agreement provided that the
Borrower may be released from the Stockholders' Agreement concurrently with
entering into the New Stockholders' Agreement, following which the Borrower
shall not amend, waive or release, or agree to the amendment, waiver or release
of the New Stockholders' Agreement.
7.18. Compliance with ERISA.
---------------------
<PAGE>
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The Borrower shall not (a) terminate any Plan so as to result in any
material liability to the PBGC, (b) engage in any "prohibited transaction" (as
defined in Section 4975 of the Code) involving any Plan which would result in a
material liability for an excise tax or civil penalty in connection therewith,
(c) incur or suffer to exist any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, involving any Plan, or
(d) allow or suffer to exist any event or condition which would reasonably be
expected to present a material risk of incurring a material liability to the
PBGC by reason of termination of any such Plan.
7.19. Limitation of Other Restrictions on Liens,
Dividend Restrictions on Subsidiaries, etc.
------------------------------------------
Except for the restrictions imposed by this Agreement and the Related
Documents and the Senior Subordinated Note Indenture, the Borrower shall not,
and shall not permit any of its Consolidated Subsidiaries to:
(a) enter into or become or remain subject to any agreement or
instrument to which the Borrower or such Consolidated Subsidiary is a party
or by which any of them or any of their respective properties may be
subject or bound which would (i) prohibit the grant of any Lien upon any of
its properties in favor of the Bank Parties or any successors thereto
pursuant to any extension, renewal or replacement of Indebtedness
constituting Obligations, or (ii) restrict or prohibit the transfer or
disposition of any of its properties, or require the disposition of or
application of the proceeds of any such disposition in a specified manner,
except a restriction on Liens on or transfers or other dispositions of
property subject to a Permitted Lien for the benefit of the holder of such
Permitted Lien; or
(b) be or become subject to any restriction of any nature (whether
arising by agreement or otherwise) on the right of the Borrower or such
Consolidated Subsidiary from time to time (i) in the case of a Consolidated
Subsidiary, to declare and pay dividends or make other distributions with
respect to the shares of its capital stock owned by the Borrower or any of
its Consolidated Subsidiaries, (ii) in the case of the Borrower or any of
its Consolidated Subsidiaries, to pay any obligations from time to time
owed to the Borrower or any of its Consolidated Subsidiaries, or (iii) in
the case of the Borrower or any of its Consolidated Subsidiaries, make
loans or advances to the Borrower of any of its Consolidated Subsidiaries,
except a restriction of general applicability under applicable Law.
7.20. Limitation on Other Restrictions on Amendment
of This Agreement, etc.
-----------------------
<PAGE>
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The Borrower shall not, and shall not permit any of its Subsidiaries
to, enter into, become or remain subject to any agreement or instrument to which
the Borrower or such Subsidiary is a party or by which it or any of its
respective properties may be subject or bound, which would prohibit or require
the consent of any person to any amendment, modification or supplement to this
Agreement or any of the Related Documents, except for this Agreement and the
Related Documents.
7.21. Limitation on Creation of Subsidiaries.
--------------------------------------
The Borrower shall not, and shall not cause or permit any of its
Subsidiaries to, establish, create or acquire after the Closing Date any
Subsidiary; provided that the Borrower and its Subsidiaries may establish or
create Subsidiaries so long as (i) at least 30 days' written notice is provided
to the Administrative Agent, (ii) all of the capital stock of such new
Subsidiary is pledged pursuant to a Securities Pledge Agreement or other similar
securities pledge agreement, as applicable, and the certificates representing
such stock, together with stock powers duly executed in blank, are delivered to
the Collateral Agent, and (iii) any such new Subsidiary shall have executed and
delivered a Subsidiary Guarantee or other similar guarantee and any other
Security Document or similar document requested by the Collateral Agent or the
Required Banks. In addition, each new Subsidiary shall execute and deliver or
shall cause to be executed and delivered all relevant documentation of the type
described in Article V as such Subsidiary would have delivered if such
Subsidiary were a Subsidiary on the Closing Date.
7.22. Borrowings Under the Australian Revolving Loan
Facility.
---------
The Borrower shall not permit KAP to incur additional Indebtedness for
Borrowed Money under the Australian Revolving Loan Facility unless (i) the
Borrower shall provide to the Administrative Agent notice within one week
following such incurrence of the amount and date of such incurrence and (ii) at
the time of the incurrence of such Indebtedness for Borrowed Money, the
conditions specified in Sections 5.02(b), 5.02(c) and 5.02(d) shall be
satisfied.
Each notice by the Borrower of an incurrence by KAP of Indebtedness
for Borrowed Money under the Australian Revolving Loan Facility shall constitute
a representation and warranty by the Borrower as of the date of such notice of
compliance with this Section 7.22. Failure of the Administrative Agent to
receive notice from the Borrower to the contrary before such incurrence shall
constitute a further representation and warranty by the Borrower of compliance
with this Section 7.22.
<PAGE>
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ARTICLE VIII.
DEFAULTS
--------
8.01. Events of Default.
-----------------
An Event of Default shall mean the occurrence or existence of one or
more of the following events or conditions (whatever the reason for such Event
of Default and whether voluntary, involuntary or effected by operation of Law):
(a) The Borrower shall fail to pay when due any principal (whether by
mandatory prepayment, Scheduled Amortization Payment, at maturity or
otherwise) of any Loan or any Letter of Credit Reimbursement Obligation or
to make any required cash collateralization of any outstanding Letter of
Credit; or
(b) The Borrower shall fail to pay when due interest on any Loan, any
fee, indemnity or expense (including any amount payable pursuant to Section
2.11) or any other amount due hereunder or under any of the Related
Documents, and such failure shall have continued for a period of five (5)
Business Days; or
(c) Any material representation or warranty made or deemed to have
been made by the Borrower or any Guarantor under this Agreement or any of
the Related Documents or any material statement made by the Borrower in any
financial statement, certificate, report, exhibit or document furnished by
the Borrower to any Agent or any Bank Party pursuant to this Agreement or
any of the Related Documents shall proved to have been false or misleading
in any material respect as of the time when made (including by omission of
material information necessary to make such representation, warranty or
statement, in light of the circumstances under which it was made, not
misleading); or
(d) The Borrower shall default in the performance or observance of
any covenant contained in Article VII or Section 6.01(i); or
(e) The Borrower or any Guarantor shall default in the performance or
observance of any other covenant, agreement or duty under this Agreement or
any Related Document and (i) in the case of a default under Section 6.01
(other than under subsection (j) of such Section 6.01), such default shall
have continued for a period of ten (10) days after notice from the
Administrative Agent to the Borrower, (ii) in the case of any other
default, such default shall have continued for a period of thirty (30)
<PAGE>
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days after notice from the Administrative Agent to the Borrower, and (iii)
in the case of any default under any Security Document, the Required Banks
shall have determined in good faith that such default has had, is having or
would reasonably be likely to have a material adverse effect on its rights
and remedies thereunder or such default shall have continued beyond any
period of grace with respect thereto as provided in such Security Document,
but in any event for a period of not less than thirty (30) days; or
(f) The Borrower or any of its Subsidiaries (i) shall default (as
principal or as guarantor or other surety) in any payment of any obligation
(or set of related obligations) in respect of Indebtedness in excess of
$5,000,000 in aggregate amount beyond any period of grace with respect
thereto or, if such obligation or obligations is or are payable or
repayable on demand, shall fail to pay or repay such obligation or
obligations when demanded, or (ii) shall default in the observance of any
covenant, term or condition contained in any agreement or instrument by
which such obligation or obligations is or are created, secured or
evidenced if the effect of such default is to cause, or to permit the
holder or holders of such obligation or obligations (or a trustee or agent
on behalf of such holder or holders) to cause, all or part of such
obligation or obligations to become due before its or their otherwise
stated maturity; or
(g) The occurrence of any event described in subsections (i) through
(viii) below, other than a Reportable Event described in clause (iv) of
such defined term, if the aggregate of the amount of the unfunded benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) for each Plan to
which such event relates, plus the aggregate withdrawal liability due for
each Multiemployer Plan to which such event relates, is greater than
$750,000; the occurrence of an event described in subsection (ix) below and
the PBGC premiums due and unpaid exceed $250,000; or the occurrence of a
Reportable Event as described in clause (iv) of such defined term:
(i) The PBGC notifies a Plan pursuant to Section 4042 of ERISA
by service of a complaint, written threat of filing a law suit or
otherwise of its determination that an event described in Section
4042(a) of ERISA has occurred, a Plan should be terminated, or a
trustee should be appointed for a Plan; or
(ii) Any action is taken to terminate a Plan pursuant to its
provisions or the plan administrator files with the PBGC a notice of
intent to terminate a Plan in accordance with Section 4041 of ERISA;
or
(iii) Any action is taken by a plan administrator to have a
trustee appointed for a Plan pursuant to Section 4042 of ERISA; or
<PAGE>
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(iv) A return is filed with the Internal Revenue Service, or
a Plan is notified by the Secretary of the Treasury that a notice of
deficiency under Section 6212 of the Code has been mailed, with
respect to the tax imposed under Section 4971(a) of the Code for
failure to meet the minimum funding standards established under
Section 412 of the Code; or
(v) A Reportable Event occurred with respect to a Plan; or
(vi) Any action is taken to amend a Plan to become an employee
benefit plan described in Section 4021(b)(1) of ERISA, causing a Plan
termination under Section 4041(e) of ERISA; or
(vii) The Borrower or any Controlled Group Member receives a
notice of liability or demand for payment on account of complete
withdrawal under Section 4203 of ERISA, partial withdrawal under
Section 4205 of ERISA or on account of becoming secondarily liable for
withdrawal liability payments under Section 4204 of ERISA (sale of
assets); or
(viii) The property or assets of the Borrower or any Controlled
Group Member are encumbered as a result of security provided to a Plan
pursuant to Section 412 of the Code or Section 306 of ERISA in
connection with a request for a minimum funding waiver or extension of
the amortization period, or pursuant to Section 401(a)(29) of the Code
or Section 307 of ERISA as a result of a Plan amendment; or
(ix) The Borrower or a Controlled Group Member fails to pay the
PBGC premium with respect to a Plan when due and it remains unpaid for
more than thirty (30) days thereafter.
For purposes of subsection (g)(i) above, the amount of the unfunded
benefit liabilities shall be determined and certified to by an actuary
selected or approved by the Administrative Agent or in any other manner
chosen by the Administrative Agent, and the annual withdrawal liability
payment due for the Multiemployer Plan(s) shall be determined from the
notice of withdrawal liability or demand for payment issued by the
Multiemployer Plan(s); or
(h) One or more judgments for the payment of money shall have been
entered against the Borrower or any of its Subsidiaries, which judgment or
judgments exceed $5,000,000 in the aggregate, are not fully covered by
insurance and such judgment or judgments shall have become final and
nonappealable or shall have remained undischarged and unstayed for a period
of sixty (60) consecutive days; or
<PAGE>
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(i) A writ or warrant of attachment, garnishment, execution,
distraint or similar process shall have been issued against the Borrower or
any of its Subsidiaries or any of their respective properties in an amount
exceeding $5,000,000 in aggregate, which shall have become final and
nonappealable or remained undischarged and unstayed for a period of sixty
(60) consecutive days; or
(j) Any Official Authorization now or hereafter made by or with any
Official Body in connection with this Agreement or any Related Document is
not obtained or shall have ceased to be in full force and effect or shall
have been modified or amended or shall have been held to be illegal or
invalid, and such event or condition has, or would reasonably be expected
to have, a Material Adverse Effect; or
(k) Any Security Document shall cease to be in full force and effect;
or any Lien created or purported to be created in any Collateral shall fail
to be a valid, enforceable and perfected Lien in favor of the
Administrative Agent for the benefit of the Bank Parties securing the
Obligations, prior to all other Liens except Permitted Liens, except as the
result of any action or failure to act on the part of any of the Bank
Parties; or
(l) This Agreement or any Related Document or any term or provision
hereof or thereof shall cease to be in full force and effect (except in
accordance with the express terms of this Agreement or such Related
Document), or the Borrower or any Guarantor shall, or shall purport to,
terminate (except in accordance with the terms of this Agreement or such
Related Document), repudiate, declare voidable or void or otherwise
contest, this Agreement or such Related Document or term or provision
hereof or thereof or any obligation or liability of the Borrower hereunder
or thereunder; or
(m) Any Official Body shall have held or ruled that Article VII of
the Acquisition Agreement is not valid and binding on Beazer East or the
Acquisition Agreement Guarantee is not valid and binding on Beazer Limited,
or the Borrower shall have agreed to the withdrawal, revocation or
modification of the Acquisition Agreement or the Acquisition Agreement
Guarantee without the prior written consent of the Required Banks; or
(n) (i) (A) a failure by Beazer East to pay any obligation or set of
obligations under Article VII of the Acquisition Agreement in excess of
$5,000,000 in aggregate, which failure shall have continued for a period of
thirty (30) days or more, or (B) any other failure by Beazer East to
perform any obligation or set of obligations under Article VII of the
Acquisition Agreement which the Required Banks shall determined in good
faith has had, is having or would be reasonably likely to have a Material
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Adverse Effect; and (ii) a failure to perform by Beazer Limited under the
Acquisition Agreement Guarantee with respect to such obligation or set of
obligations; provided, however, that, if an arbitration proceeding or
arbitration proceedings shall have been instituted under Article XI of the
Acquisition Agreement with respect to any such obligation or set of
obligations, such failure by Beazer East to pay or perform such obligation
or obligations shall not constitute an Event of Default hereunder unless or
until (w) a final decision shall have been rendered against Beazer East in
such arbitration proceeding and Beazer East shall have failed to perform
such obligation for a period of thirty (30) days after such final decision
has been rendered, (x) the Required Banks shall have determined in good
faith that such arbitration proceeding is not being diligently prosecuted,
(y) a period of one year shall have passed since the commencement of such
arbitration proceeding, or (z) the Borrower shall have expended more than
$10,000,000 in the aggregate in unreimbursed expenditures as a result of
such failure to perform by Beazer East and Beazer Limited; or
(o) (i) Any person other than the Investors and their controlled (but
not controlling or commonly controlled) Affiliates shall become the
beneficial owner of more than 50% of the voting stock of the Borrower or
shall obtain the power to nominate or elect, by agreement or otherwise, at
least a majority of the board of directors of the Borrower, or the
Management Investors shall cease to be the beneficial owners of at least
10% of the voting stock of the Borrower; or (ii) a "Change of Control"
under and as defined in the Senior Subordinated Note Indenture shall occur;
or
(p) A proceeding shall have been instituted in respect of the
Borrower or any of its Significant Subsidiaries:
(i) seeking to have an order for relief entered in respect of
the Borrower or such Subsidiary, or seeking a declaration or entailing
a finding that the Borrower or such Subsidiary is insolvent or a
similar declaration or finding, or seeking dissolution, winding-up,
charter revocation or forfeiture, liquidation, reorganization,
arrangement, adjustment, composition or other similar relief with
respect to the Borrower or such Subsidiary, its assets or its debts
under any law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entitles or any other
similar law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, custodian,
liquidator, assignee, sequestrator or other similar official for the
Borrower or such Subsidiary or for all or any substantial part of its
property,
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and such proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of sixty (60)
consecutive days; or
(q) the Borrower or any of its Significant Subsidiaries, shall become
insolvent, shall fail to pay, become unable to pay, or state that it is or
will be unable to pay, its debts as they become due, shall voluntarily
suspend transaction of its business, is taken to fail to comply with a
statutory demand in accordance with section 459F of the Corporations Law
(in the case of Australian Subsidiary Guarantors) shall make a general
assignment for the benefit of creditors, shall institute (or fail to
controvert in a timely and appropriate manner) a proceeding described in
Section 8.01(p)(i) or (whether or not any such proceeding has been
instituted) shall consent to or acquiesce in any such order for relief,
declaration, finding or relief described therein, shall institute (or fail
to controvert in a timely and appropriate manner) a proceeding described in
Section 8.01(p)(ii) or (whether or not any such proceeding has been
instituted) shall consent to or acquiesce in any such appointment or to the
taking of possession by any such official of all or any substantial part of
its property, whether or not any such proceeding is instituted, shall
revoke or forfeit its articles of incorporation (or other constituent
documents), dissolve, wind up or liquidate itself or any substantial part
of its property (except as provided in Section 7.10) or resolve to do so,
appoints or any other person appoints an administrator to an Australian
Subsidiary Guarantor or takes any step to do so, or shall take any action
in furtherance of any of the foregoing.
8.02. Consequences of an Event of Default.
-----------------------------------
(a) If an Event of Default specified in subsections (a) through (o)
of Section 8.01 shall occur and be continuing or shall exist, then, in addition
to all other rights and remedies which any Bank Party may have hereunder or
under any Related Document, at law, in equity or otherwise, the Banks shall be
under no further obligation to make Loans, the Issuing Banks shall be under no
further obligation to issue any Letters of Credit and the Administrative Agent
may, and (subject to Section 9.05) upon the written request of the Required
Banks, shall, by notice to the Borrower, from time to time, do any or all of the
following:
(i) Declare the Commitments terminated, whereupon the Commitments
shall be terminated and any fees hereunder shall be immediately due and
payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived, and a cause of action therefor
shall immediately accrue; and
(ii) Declare the unpaid principal amount of the Loans, interest
accrued thereon and all other Obligations (including the obligation to cash
collateralize
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outstanding Letters of Credit) to be immediately due and payable without
presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived, and a cause of action therefor shall
immediately accrue.
(b) If an Event of Default specified in subsection (p) or (q) of
Section 8.01 shall occur or exist, then, in addition to all other rights and
remedies which the Administrative Agent or any Bank Party may have hereunder or
under any Related Document, at law, in equity or otherwise, the Commitments
shall automatically terminate and the Banks shall be under no further obligation
to make Loans, the Issuing Banks shall be under no further obligation to issue
any Letters of Credit, and the unpaid principal amount of the Loans, all
interest accrued thereon and all other Obligations (including the obligation to
cash collateralize outstanding Letters of Credit) shall become immediately due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue.
8.03. Set-Off.
-------
If the unpaid principal amount of any Obligation shall have become due
and payable (by acceleration or otherwise), each Bank Party, each branch,
subsidiary or affiliate of each Bank Party anywhere in the world and each
Participant, shall have the right, in addition to all other rights and remedies
available to it, without notice to the Borrower, to set off against and
appropriate and apply against such Obligation any debt owing to, and any other
funds held in any manner for the account of, the Borrower by such Bank party or
such branch, subsidiary or affiliate or such Participant, including all funds in
all deposit accounts (whether time or demand, general or special, provisionally
credited or finally credited, or otherwise) now or hereafter maintained by the
Borrower with such Bank Party or such branch, subsidiary or affiliate or such
Participant. Such right shall be absolute and unconditional and, without
limitation, shall exist whether or not such Bank Party or such branch,
subsidiary or affiliate or such Participant shall have given notice or made any
demand hereunder or under any Related Document or under any participation,
whether or not such debt owing to or funds held for the account of the Borrower
is or are contingent or absolute or matured or unmatured, whether or not any
amounts owing to any Participant with respect to any participation are matured
or unmatured, whether or not any such branch, subsidiary or affiliate or
Participant is in privity with or is a creditor of the Borrower, and regardless
of the existence or adequacy of any collateral, guaranty or any other security,
right or remedy available to any Bank Party or Participant. Such right shall
exist regardless of the currency in which is expressed such debt owing to or
such funds held for the account of the Borrower, and if such debt is or such
funds are expressed in a currency (the "Set-off Currency") other than the
currency payable hereunder (the "Contractual Currency"), for purposes of
effecting set-off the rate of exchange used shall be that at which in accordance
with normal banking procedures such Bank Party or such branch, subsidiary or
affiliate or such Participant could
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purchase the Contractual Currency with the Set-off Currency on the Business Day
following such set-off. The Borrower hereby consents to and confirms the
foregoing arrangements and confirms each Bank Party's rights, and each branch's
subsidiary's and affiliate's rights, and each Participant's rights, of banker's
lien and set-off. The rights provided by this Section are in addition to all
other rights of set-off and banker's lien and all other rights and remedies
which any Bank Party (or any branch, subsidiary or affiliate or any Participant)
may otherwise have under this Agreement, any Related Document, at law, in equity
or otherwise, and nothing in this Agreement or in any of the Related Documents
shall be deemed to be a waiver or prohibition of or restriction on any Bank
Party's rights, or any branch's, subsidiary's or affiliate's rights, or any
Participant's rights, of banker's lien or set-off.
8.04. Application of Proceeds.
-----------------------
Any amount received by any Bank Party, whether as the result of any
voluntary payment or prepayment, upon the exercise of any right of set-off or
banker's lien, by counterclaim, or by any other source, shall be applied against
the Obligations as follows:
(a) first, to payment in full of all fees, indemnities and other
amounts due to the Agents in their respective capacities as such;
(b) second, to payment in full of all fees, indemnities and other
amounts due to the Issuing Banks and the Swingline Bank in their capacities
as such, other than principal of or interest on Swingline Loans and Letter
of Credit Reimbursement Obligations, ratably amongst the Issuing Banks and
the Swingline Bank in proportion to the respective amounts described in
this clause "second" due to them;
(c) third, to payment in full of all fees (other than fees in respect
of Letters of Credit pursuant to Section 3.02(a)) and expenses due
hereunder or under any of the Related Documents and not paid pursuant to
clause (a) or (b) above;
(d) fourth, to payment in full of all interest then due on
outstanding Loans and Letter of Credit Unreimbursed Draws and Swingline
Loans and to payment in full of all fees in respect of Letters of Credit
pursuant to Section 3.02(a);
(e) fifth, to payment in full of all principal of outstanding Loans,
Letter of Credit Unreimbursed Draws and Swingline Loans, ratably among the
Banks, the Issuing Banks and the Swingline Bank in proportion to the
respective amounts described in this clause "fifth" due to them;
(f) sixth, to funding of the Letter of Credit Collateral Account in
accordance with the provisions hereof;
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(g) seventh, to payment in full of any and all other amounts due
hereunder or under any of the Related Documents in respect of the
Commitments, the Loans, the Letters of Credit or otherwise; and
(h) thereafter, to the Borrower or as otherwise required by Law.
8.05. Equalization Among Bank Parties and Participants.
------------------------------------------------
The Bank Parties and the Participants hereby agree among themselves
that, if any Bank Party or Participant shall receive (whether by voluntary
payment, realization upon security, set-off or from any other source) any amount
on account of any part of the Obligations which is in excess of the share
thereof to which such Bank Party or Participant is entitled pursuant to the
terms of this Agreement, then the Bank Party or Participant receiving such
excess amount shall notify the other Bank Parties and Participants which may be
entitled to a share thereof and the Administrative Agent of such receipt, and
equitable adjustment will be made in the manner stated in this Section so that,
in effect, all such excess amounts are shared Pro Rata among the Bank Parties
and Participants. The Bank Party or Participant receiving any such excess
amount shall purchase (which it shall be deemed to have done simultaneously with
the receipt of such excess amount) for cash from the other Bank Parties and
Participants, as the case may be, an interest in the Obligations owing to each
other Bank Party or Participant in such amount as shall result in a Pro Rata
participation by all Bank Parties and Participants in such excess amount (and to
the extent of any such sharing, the Bank Party or Participant receiving such
interest shall be deemed to be a Participant); provided, however, that if all or
any portion of such excess amount shall thereafter be recovered from the Bank
Party or Participant making such purchase, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, together with
interest or other amounts, if any, required by Law (including court order) to be
paid by such Bank Party or Participant, as the case may be.
ARTICLE IX.
THE AGENTS
----------
9.01. Appointment.
-----------
The Bank Parties hereby irrevocably appoint SBC Warburg Dillon Read
Inc. to act as their Arranger and Syndication Agent, Mellon Bank, N.A. to act as
their Administrative Agent and Collateral Agent and Swiss Bank Corporation to
act as their Documentation Agent hereunder and under the Related Documents as
herein specified. Each Bank Party hereby irrevocably authorizes the Agents to
take such action on its behalf under the provisions of this Agreement and the
Related Documents, and to exercise such powers and to perform such
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duties hereunder and thereunder, as are specifically delegated to or required of
the Agents by the terms hereof or thereof, together with such powers as are
reasonably incidental thereto. Each of the Agents hereby agrees to act in its
respective capacities on behalf of the Bank Parties on the terms and conditions
set forth in this Agreement and the Related Documents. Each Bank Party hereby
irrevocably authorizes the Agents to execute and deliver each of the Related
Documents as an Agent and to accept delivery of such of the other Related
Documents as may not require execution by the Agents. Each Bank Party hereby
agrees that the rights and remedies granted to the Agents hereunder and under
the Related Documents shall be exercised exclusively by the Agents, and that no
Bank Party shall have any right individually to exercise any such right or
remedy, except to the extent, if any, expressly provided herein or therein.
9.02. Delegation of Duties.
--------------------
Each of the Agents may perform any of its duties hereunder or under
the Related Documents by or through agents or employees. None of the Agents
shall be responsible for the negligence or misconduct of any agents selected by
it with reasonable care. Each of the Agents may consult with legal counsel
(including counsel for such Agent or in-house or other counsel for the
Borrower), independent public accountants and any other experts selected by it
from time to time, and any such Agent shall not be liable to the Bank Parties
for any action taken or omitted to be taken in good faith by it in accordance
with the advice of such counsel, accountants or experts.
9.03. Nature of Duties; Independent Credit Investigation.
--------------------------------------------------
(a) The Agents shall have no duties or responsibilities except those
expressly set forth in this Agreement or the Related Documents, and no implied
duties or responsibilities on the part of the Agents shall be read into this
Agreement or any Related Document or shall otherwise exist. The duties and
responsibilities of each of the Agents under this Agreement and the Related
Documents shall be mechanical and administrative in nature; the Agents shall not
by reason of this Agreement or any of the Related Documents have a fiduciary
relationship in respect of any Bank Party; and nothing in this Agreement or any
Related Document, expressed or implied, is intended to or shall be so construed
as to impose upon any of the Agents any obligations in respect of this Agreement
or any Related Document except as expressly set forth herein or therein.
(b) The Agents are and shall be solely the agents of the Bank
Parties. The Agents do not assume, and shall not at any time be deemed to have,
any relationship of agency or trust with or for, or any other duty or
responsibility to, the Borrower or any person other than the Bank Parties. The
provisions of this Article IX are for the benefit of the Bank
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Parties (and the other persons named in Section 9.06), and the Borrower shall
not have any rights under any of the provisions of this Article IX.
(c) Each Bank Party expressly acknowledges (i) that the Agents have
not made any representation or warranty to it, and that no act by the Agents
heretofore or hereafter taken, including any review of the affairs of the Credit
Parties, shall be deemed to constitute any representation or warranty by the
Agents to any Bank Party; (ii) that, independently and without reliance upon the
Agents, and based upon such documents and information as it has deemed
appropriate, it has made its own independent investigation of the financial
condition and affairs, and its own appraisal of the creditworthiness, of the
Credit Parties, and its own credit and legal analysis and decision to enter into
this Agreement and the Related Documents; (iii) that, independently and without
reliance upon the Agents, and based upon such documents and information as it
shall deem appropriate at the time, it will continue to make its own decisions
to take or not take action under or in connection with this Agreement or the
Related Documents; and (iv) that the Agents have and shall have no duty or
responsibility, either initially or on a continuing basis, to provide it with
any credit or other information, except as otherwise expressly provided herein,
whether coming into their possession before the making of any Loans or issuance
of any Letters of Credit hereunder or at any time or times hereafter.
9.04. Actions in Discretion of Agents; Instructions
from Banks.
---------------------------------------------
Each of the Agents agrees, upon the written request of the Required
Banks, to take any action of the type specified as being within such Agent's
rights, powers or discretion herein or in the Related Documents; provided,
however, that such Agent shall be under no obligation to take any action
hereunder or under any Related Document if such Agent believes in good faith
that taking such action may conflict with any Law or any provision of this
Agreement or any Related Document or may require such Agent to qualify to do
business in any jurisdiction where it is not then so qualified. In the absence
of a request by the Required Banks, each of the Agents shall have authority (but
under no circumstances shall be obligated), in its sole discretion, to take or
not to take any such action, unless this Agreement or the Related Documents
specifically require the consent of the Required Banks, in which case such Agent
shall not take such action absent such direction or consent. Any action taken
or failure to act pursuant to such instructions or discretion shall be binding
on all the Bank Parties. No Bank Party shall have any right of action against
any of the Agents, and none of the Agents shall have any liability to any person
as a result of (a) acting or refraining from acting in accordance with the
directions of the Required Banks, (b) refraining from acting in the absence of
instructions to act from the Required Banks, whether or not such Agent has
discretionary power to take such action, or (c) taking discretionary action it
is authorized to take under this Section 9.04, subject to the provisions of
Section 9.05.
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9.05. Exculpatory Provisions.
----------------------
(a) None of the Agents nor any of their respective directors,
officers, employees or agents shall be liable to any of the Agents or any Bank
Party for any action taken or omitted to be taken by it hereunder or under any
of the Related Documents or in connection herewith or therewith, unless caused
by its own gross negligence or willful misconduct, as finally determined by a
court of competent jurisdiction.
(b) In performing its functions and duties hereunder or under the
Related Documents on behalf of the Bank Parties, each Agent shall exercise the
same care which it would exercise in dealing with loans for its own account, but
it shall not be responsible in any manner to any of the Bank Parties for (i) the
execution, delivery, effectiveness, enforceability, genuineness, validity or
adequacy of this Agreement or any of the Related Documents, (ii) any recital,
representation, warranty, document, certificate, report or statement herein or
therein or made or furnished under or in connection with this Agreement or any
Related Document, (iii) any failure of the Borrower or any other person to
perform any of their respective obligations under this Agreement or any of the
Related Documents, (iv) the existence, validity, enforceability, perfection,
recordation, priority, adequacy or value, now or hereafter, of any Lien or other
direct or indirect security afforded or purported to be afforded by any of the
Security Documents or otherwise from time to time, or (v) caring for,
protecting, insuring, or paying any taxes, charges or assessments with respect
to, any Collateral.
(c) None of the Agents shall be under any obligation to ascertain,
inquire or give any notice relating to (i) the performance or observance of any
of the terms or conditions of this Agreement or any of the Related Documents on
the part of the Borrower or any other person, (ii) the business, operations,
condition (financial or otherwise) or prospects of the Borrower or any other
person, or (ii) except to the extent set forth in Section 9.05(e), the existence
of any Event of Default or Potential Default.
(d) None of the Agents shall be under any obligation to any of the
Bank Parties, either initially or on a continuing basis, to provide any Bank
Party with any notices, reports or information of any nature, whether in its
possession presently or hereafter, except for such notices, reports and other
information expressly required by this Agreement or any of the Related Documents
to be furnished by such Agent to such Bank Party.
(e) None of the Agents shall be under any obligation to any of the
Bank Parties, either initially or on a continuous basis, to ascertain the
existence or possible existence of any Event of Default or Potential Default and
none of the Agents shall be deemed to have knowledge of the occurrence of an
Event of Default or Potential Default unless a required payment by the Borrower
to such Agent has not been made or such Agent
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has received notice from another Bank Party or the Borrower specifying such
Event of Default or Potential Default and stating that such notice is a "Notice
of Default." In the event that the Administrative Agent fails to so receive any
such payment or receives any such notice, the Administrative Agent shall give
prompt notice thereof to the other Bank Parties.
9.06. Reimbursement and Indemnification.
---------------------------------
Each Bank severally agrees to reimburse and indemnify each of the
Agents in their respective capacities as such and each of their respective
directors, officers, employees and agents (to the extent not reimbursed by the
Borrower), Pro Rata for all Proportions, for and against any and all
liabilities, obligations, losses (other than any losses resulting from a failure
by the Administrative Agent to receive from the Borrower any amount owing
pursuant to Section 9.13), damages, penalties, actions, judgment, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including the fees
and disbursements of counsel for each of the Agents or such other person in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Agent or such other person shall be
designated a party thereto) which may at any time be imposed on, incurred by or
asserted against each Agent, in its capacity as such, or such other person as a
result of, or arising out of, or in any way related to or by reason of, this
Agreement or the Related Documents, any transaction from time to time
contemplated hereby or thereby, or any transaction financed in whole or in part
or directly or indirectly with any Loans or Letters of Credit (or the proceeds
of any thereof); provided, that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent that they result from an Agent's
or such other person's gross negligence or willful misconduct, as finally
determined by a court of competent jurisdiction.
9.07. Administration by the Agents.
----------------------------
(a) Each of the Agents shall be entitled to rely upon any writing,
facsimile transmission, telegram, telex or teletype message, resolution, notice,
consent, certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise (whether or not such communication is
made in a manner permitted or required by this Agreement or any Related
Document) believed by it to be genuine and correct and to have been signed, sent
or made by the proper party or parties, and each of the Agents shall have no
duty to verify the identify or authority of any person giving any such
communication. Each of the Agents may conclusively rely upon the truth of the
statements and the correctness of the opinions expressed in any certificates or
opinions furnished to such Agent in accordance with the requirements of this
Agreement or any of the Related Documents. Whenever an Agent shall deem it
necessary or desirable that a matter be proved or established with respect to
the Borrower, any of its Subsidiaries or any other Bank Party, such matter may
be
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established by a certificate of the Borrower or such other Bank Party, as the
case may be, and such Agent may conclusively rely upon such certificate (unless
other evidence with respect to such matter is specifically prescribed in this
Agreement or any of the Related Documents). Each of the Agents may fail or
refuse to take any action unless it shall be indemnified to its satisfaction
from time to time against any and all amounts, liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature which may be imposed on, incurred by or asserted against
such Agent by reason of taking or continuing to take any such action.
9.08. The Agents in Their Respective Individual Capacities.
----------------------------------------------------
Each of the Agents shall have the same rights and powers hereunder and
under the Related Documents as any other Bank Party and may exercise the same as
though it were not an Agent, and the terms "Banks," "Bank Parties" or "holders
of Notes" shall, unless the context hereof otherwise indicates, include any of
the Agents in their individual capacities. Except as otherwise provided herein,
each of the Agents and its affiliates may, without liability to account, make
loans to, accept deposits from, acquire debt or equity interests in, act as
trustee under indentures of, and generally engage in any other kind of business
with, the Borrower and its Subsidiaries and their respective stockholders and
affiliates as though it were not acting as an Agent.
9.09. Holders of Notes.
----------------
Each of the Agents may deem and treat any Bank payee of any Note as
the owner of such Note for all purposes hereof, unless and until a Transfer
Supplement with respect to the assignment or transfer thereof shall have been
filed with the Agents in accordance with Section 10.12. Any request, authority,
direction or consent of any person who at the time of making such request or
giving such authority, direction or consent was a Bank shall be conclusive and
binding on any present or subsequent holder, transferee or assignee of such Note
or of any Note or Notes issued in exchange therefor.
9.10. Successor Agents.
----------------
(a) Any of the Agents may resign at any time by giving ten (10) days'
prior written notice thereof to the other Bank Parties and the Borrower, such
resignation to be effective on the date specified in such notice, and on such
date, the resigning Agent shall be automatically discharged from its duties
under this Agreement and the Related Documents without requirement of any
further action by such resigning Agent. Any of the Agents may be removed at any
time by the Required Banks, giving ten (10) days' prior written notice thereof
to the Agent, the other Bank Parties and the Borrower, such removal to be
effective
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on the date specified in such notice and, on such date, the removed Agent shall
be automatically discharged from its duties under this Agreement and the Related
Documents without requirement of any further action by such removed Agent, the
other Bank Parties or the Borrower. Upon any such resignation or removal of an
Agent, the Required Banks shall have the right to appoint a successor Agent;
provided, however, that, so long as no Event of Default or Potential Default
hereunder shall have occurred and be continuing, any such appointment of a
successor Agent shall be subject to the prior written consent of the Borrower
not to be unreasonably withheld. If no successor Agent shall have been appointed
and accepted such appointment within ten (10) days after the resigning Agent's
notice of resignation or removed Agent's notice of removal, then the resigning
or removed Agent, on behalf of the other Bank Parties may, but shall not be
obligated to, appoint a successor Agent, which shall be either a Bank or a
commercial bank organized under the laws of the United States of America or any
state thereof and have a combined capital and surplus of at least
$1,000,000,000; provided, however, that so long as no Event of Default or
Potential Default shall have occurred and be continuing or shall exist, any such
appointment of a successor Agent shall be subject to the prior consent of the
Borrower not to be unreasonably withheld. Upon the appointment of a successor
Agent and acceptance by such successor Agent of its appointment, such successor
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the former Agent in its capacity as such, without
further act, deed or conveyance. Upon the effective date of resignation or
removal of an Agent, such Agent shall be discharged from its duties as such
under this Agreement and the Related Documents, but the provisions of this
Agreement and the Related Documents shall inure to its benefit as to any actions
taken or omitted by it while it was Agent. If and for so long as no successor
Agent shall have been appointed, then any notice or other communication required
or permitted to be given by such Agent shall be sufficiently given if given by
the Required Banks, all notices or other communications required or permitted to
be given to such Agent shall be given to each other Bank Party, all payments to
be made to such Agent shall be made directly to the Bank Party for whose account
such payment is required to be made, and any and all interests granted to such
Agent for the benefit of the Bank Parties under any of the Security Documents
shall be deemed to have been granted to the other Bank Parties.
(b) Notwithstanding any other provision of this Agreement or the
Related Documents to the contrary, none of the Agents nor any of their
respective directors, officers, employees or agents shall be liable to any other
Bank Party for any action taken or omitted to be taken by it under or in
connection with this Section 9.10.
9.11. Additional Agents.
-----------------
If any of the Agents shall from time to time deem it necessary or
advisable, for its own protection in the performance of its duties hereunder or
in the interest of the other
<PAGE>
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Bank Parties, such Agent and the Borrower shall execute and deliver a
supplemental agreement and all other instruments and agreements necessary or
advisable, in the opinion of such Agent, to constitute another commercial bank
or trust company, or one or more other persons approved by such Agent, to act as
co-Agent or agent with respect to any part of the Collateral, with such powers
of such Agent as may be provided in such supplemental agreement, and to vest in
such bank, trust company or persons as such co-Agent or separate agent, as the
case may be, any properties, rights, powers, privileges or duties of such Agent
under this Agreement or the Related Documents.
9.12. Calculations.
------------
In the absence of gross negligence or willful misconduct, none of the
Agents shall be liable for any error in computing the amount payable to any Bank
Party, whether in respect of the Loans, Letters of Credit, fees or any other
amounts due to the Bank Parties under this Agreement or the Related Documents.
In the event an error in computing any amount payable to any Bank Party is made,
such Agent, the Borrower and each affected Bank Party shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and interest on such adjusted amount will accrue as set forth in
Section 9.14.
9.13. Administrative Agent's Fee.
--------------------------
The Borrower agrees to pay to the Administrative Agent as
consideration for its services as Administrative Agent hereunder such fees as
are set forth in a separate letter agreement between the Administrative Agent
and the Borrower.
9.14. Funding by Administrative Agent.
-------------------------------
Unless the Administrative Agent shall have been notified in writing by
any Bank not later than the close of business on the day before the day on which
any Loan is requested by the Borrower to be made that such Bank will not make
its Pro Rata share of such Loan available, the Administrative Agent may assume
that such Bank will make its Pro Rata share of such Loan available, and in
reliance upon such assumption the Administrative Agent may (but in no
circumstances shall be required to) make available to the Borrower a
corresponding amount. If and to the extent that any Bank fails to make such
amount available to the Administrative Agent on such date, such Bank shall pay
such amount on demand (or, if such Bank fails to pay such amount on demand, the
Borrower shall pay such amount on demand), together with interest, for the
Administrative Agent's own account, for each day from and including the date of
the Administrative Agent's payment to and including the date of repayment to the
Administrative Agent (before and after judgment) at the following rates per
annum: (x) for each day from and including the date of such payment by
<PAGE>
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the Administrative Agent to and including the second Business Day thereafter, at
the Federal Funds Effective Rate of such day, and (y) for each day thereafter,
at the rate applicable to such Loans for such day. All payments to the agent
under this Section shall be made to the Administrative Agent at its Office in
Dollars in funds immediately available at such Office, without set-off,
withholding, counterclaim or other deduction of any nature.
ARTICLE X.
MISCELLANEOUS
-------------
10.01. Holidays.
--------
Except as otherwise provided herein, whenever any payment or action to
be made or taken hereunder or under the Related Documents shall be stated to be
due on a day which is not a Business Day, such payment or action shall be made
or taken on the next following Business Day, and such extension of time shall be
included in computing interest or fees, if any, in connection with such payment
or action.
10.02. Records.
-------
The unpaid principal amount of the Loans owing to each Bank, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, each Bank's
Commitment and the accrued and unpaid fees owing to each Bank Party shall at all
times be ascertained from the records of the Administrative Agent, which shall
be conclusive absent manifest error. The Letter of Credit Exposure, the Letter
of Credit Participating Interests, the unpaid Letter of Credit Reimbursement
Obligations, the unpaid interest accrued thereon, the interest rate or rates
applicable thereto and the accrued and unpaid Letter of Credit commissions and
fees shall at all times be ascertained from the records of the Issuing Bank of
such Letter of Credit, which shall be conclusive absent manifest error. The
Swingline Participating Interests, the unpaid principal amount of the Swingline
Loans, the unpaid interest accrued thereon and the interest rate or rates
applicable thereto shall at all times be ascertained from the records of the
Swingline Bank, which shall be conclusive absent manifest error.
10.03. Amendments or Waivers.
---------------------
(a) Agreements amending or changing any provisions of or adding to
this Agreement or the Related Documents or the rights of the Bank Parties or the
Borrower hereunder or thereunder may be entered into, and waivers or consents to
departure from the
<PAGE>
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due performance of the obligations of the Borrower hereunder or thereunder may
be given, with the consent of all or certain of the Bank Parties as follows:
(i) Any amendment, waiver or consent which would
(A) increase the Committed Amount of any Bank over the amount
thereof then in effect, or extend the Revolving Credit Expiration Date
or change any Scheduled Amortization Payment; or
(B) reduce the principal amount of or extend the time for any
scheduled payment of principal of any Loan, Letter of Credit
Reimbursement Obligation or Swingline Loan, or reduce the rate of
interest or extend the time for payment of any interest borne by any
Loan, Letter of Credit Reimbursement Obligation or Swingline loan,
shall require the written consent of such Banks as hold 100% of the
aggregate outstanding principal amount of the Loans, or, if no Loans are at
the time outstanding, Banks whose Commitments constitute 100% of the
Revolving Credit Commitments then outstanding; and
(ii) Any amendment, waiver or consent which would extend the time
for payment of or reduce the amount of any fee due and owing to any Bank
party shall require the written consent of each Bank Party affected
thereby; and
(iii) Any other amendment or waiver of or consent to departure from
the due performance by the Borrower of any covenant, representation,
warranty or other term or provision hereof or of any of the Related
Documents shall require the written consent of the Required Banks, except
that no amendment to Article III may be made (and the rights, interests or
obligations of the Issuing Banks and the Swingline Bank may not otherwise
be changed), in the case of Sections 3.01 through 3.10, without the consent
of the Issuing Banks and, in the case of Sections 3.11 through 3.14,
without the consent of the Swingline Bank, and no amendment to Article IX
may be made (and the rights, interests or obligations of any Agent may not
otherwise be changed) without the consent of the Agent affected;
provided, however, that no agreement, waiver or consent may be made which would
(w) release any Guarantor from its obligations pursuant to its Guarantee;
<PAGE>
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(x) except as expressly authorized by Section 7.10, release any Collateral
under any of the Security Documents having a fair market value (as determined in
good faith by the Board of Directors of the Borrower) in excess of $5,000,000
for any one release; or
(y) amend this Section 10.03 or change the definition of "Required Banks";
or
(z) foreclose on any of the Mortgaged Property or Australian Mortgaged
Property,
without the written consent of 100% of the Banks; and provided, further, that
Commitment and Loan Transfer Supplements may be entered into in the manner
provided in Section 10.12.
(b) With the written consent of sufficient Bank Parties as specified
in Section 10.03(a), the Administrative Agent or the Collateral Agent, as the
case may be, acting on behalf of all Bank Parties, and the Borrower may execute
amendments to this Agreement or the Related Documents, and such Agent (so
acting) may execute waivers or consents, each of which shall be effective to
bind all the Bank Parties.
(c) In the case of any waiver or consent relating to any provision
hereof or of the Related Documents, the parties shall be restored to their
positions authorized by such waiver or consent and their rights thereunder, and
any Potential Default or Event of Default so waived or consented to shall be
deemed to be cured and not continuing; but no such waiver or consent shall
extend to any other obligation or any subsequent or other Potential Default or
Event of Default or impair any right consequent thereon.
(d) Any such agreement, waiver or consent must be in writing and
shall be effective only to the extent specifically set forth in such writing.
10.04. No Implied Waiver; Cumulative Remedies.
--------------------------------------
No course of dealing and no delay or failure of any of the Agents or
any other Bank Party in exercising any right, power or privilege under this
Agreement or any of the Related Documents shall affect any other or future
exercise thereof or the exercise of any other right, power or privilege; nor
shall any single or partial exercise of any such right, power or privilege or
any abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or of any other right, power or
privilege. The rights and remedies of each of the Agents and the other Bank
Parties under the Agreement and the Related Documents are cumulative and are not
exclusive of any rights or remedies which the Agents or any other Bank Party
would otherwise have.
10.05. Notices.
-------
<PAGE>
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(a) All notices under Section 2.04 or 2.08(b) shall be sent to the
Administrative Agent by facsimile transmission (which shall be effective when
received) or by telephone confirmed by facsimile transmission or first-class
mail (which shall be effective when telephoned), in all cases with charges
prepaid. All notices under Sections 2.06(f), 2.11(b) or 8.02(a) shall be sent
to the Borrower by facsimile transmission (which shall be effective when
received), by telephone confirmed by facsimile transmission or first-class mail
(which shall be effective when telephoned) or by first-class or first-class
express mail (which shall be effective when received), in all cases with charges
prepaid. All other notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Agreement
or any Related Document shall be in writing (including facsimile transmission)
unless otherwise expressly permitted hereunder and shall be sent by hand
delivery or first-class or first-class express mail or by recognized overnight
courier, or by facsimile transmission with confirmation in writing mailed first-
class or first class express or by recognized overnight courier, in all cases
with charges prepaid, and any such properly given notice shall be effective when
received. All notices shall be sent to the applicable party at the address
stated on the signature page hereof or in accordance with the last unrevoked
written direction from such party to the other parties hereto.
(b) Any Bank giving any notice to the Borrower or any other party to
this Agreement or any Related Document shall simultaneously send a copy thereof
to the Administrative Agent, and the Administrative Agent shall promptly notify
the other Bank Parties of the receipt by it of any such notice.
(c) Each Bank Party may rely on any notice (whether or not such
notice is made in a manner permitted or required by this Agreement or any
Related Document) purportedly made by or on behalf of the Borrower, and no Bank
Party shall have any duty to verify the identity or authority of any person
giving any such notice.
10.06. Expenses; Taxes; Attorneys' Fees.
--------------------------------
(a) The Borrower agrees to pay or cause to be paid and to save each
Bank Party harmless from and against liability for the payment of all reasonable
out-of-pocket costs and expenses, including fees and expenses of counsel,
including local counsel, auditors, and all other professional, accounting,
evaluation and consulting costs, incurred by any Bank Party from time to time
and arising from or relating to (i) in the case of any of the Agents, the
negotiation, preparation, execution, delivery and performance of this Agreement
and the Related Documents (including the Commitment Letter) and the initial
syndication thereof (other than the fees of Reed Smith Shaw McClay LLP incurred
by Mellon Bank, N.A. in connection with the initial negotiation, preparation,
execution and delivery of this Agreement), (ii) in the case of the
Administrative Agent or Collateral Agent, any requested amendments,
modifications, supplements, waivers or consents (whether or not ultimately
entered into or
<PAGE>
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granted) to or with respect to this Agreement or any of the Related Documents,
(iii) in the case of each Bank Party, the enforcement or preservation of rights
under this Agreement or any of the Related Documents, including (A) the
creation, perfection or protection of any Lien on any Collateral, (B) the
protection, collection, lease, sale, taking possession of, preservation of, or
realization on, any Collateral, including advances for taxes, filing fees and
the like, (C) collection or enforcement of any outstanding Loan or Letter of
Credit Reimbursement Obligation or any other Obligation owing to any Bank Party,
(D) any litigation, proceeding, dispute, work-out, restructuring or rescheduling
related in any way to this Agreement or the Related Documents, and (E) in the
case of SBC Warburg Dillon Read Inc., any syndication with respect to this
Agreement and the Related Documents.
(b) The Borrower hereby indemnifies the Bank Parties, their
respective affiliates, and the directors, officers, employees and agents of each
thereof, and the other banks and financial institutions which may be offered the
opportunity to participate in the financing contemplated by this Agreement, and
their respective affiliates, directors, officers, employees and agents, and each
of them (collectively, the "Indemnified Parties"), and agrees to hold each of
them harmless from and against any and all losses, claims, damages, expenses or
liabilities incurred by any of them or to which any of them may become subject,
insofar as such losses, claims, damages, expenses or liabilities (or actions,
suits or proceedings, including any inquiry or investigation or claims in
respect thereof) arise out of, result from, or in any way relate to, this
Agreement, any of the Related Documents, any transactions from time to time
contemplated hereby or thereby, or any transaction financed or secured in whole
or in part, directly or indirectly, with the proceeds of any Loan or any Letter
of Credit or the proceeds of any thereof (whether or not any Indemnified Party
is a party to any action or proceeding out of which any such losses, claims,
damages, expenses or liabilities arise), and to reimburse the Indemnified
Parties, upon demand, for any legal or other expenses incurred by any thereof in
or in connection with investigating, preparing to defend, defending or otherwise
participating in any such claim, action or proceeding relating to any such loss,
claim, damage or liability, except any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the person seeking such indemnification, as finally determined by a court of
competent jurisdiction. If and to the extent that the foregoing obligations of
the Borrower under this Section 10.06(b), or any other indemnification
obligation of the Borrower hereunder or under any Related Document, shall be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable Law.
(c) The Borrower agrees to pay all stamp, document, transfer,
recording, filing, registration, search, sales and excise taxes or fees and all
other similar impositions now or hereafter determined by any Bank Party to be
payable in connection with this Agreement or any of the Related Documents or any
other documents, instruments or transactions pursuant to
<PAGE>
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or in connection herewith or therewith and the Borrower agrees to save each Bank
Party harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
10.07. Limitation on Payments; Severability.
------------------------------------
(a) Limitation on Payments. The parties hereto intend to conform to
----------------------
all applicable laws in effect from time to time limiting the maximum rate of
interest that may be charged or collected. Accordingly, notwithstanding any
other provision hereto or of any Related Document, the Borrower shall not be
required to make any payment to or for the account of any Bank Party, and each
Bank Party shall refund any payment made by the Borrower, to the extent that
such requirement or such failure to refund would violate or conflict with the
nonwaivable provisions of any applicable Law limiting the maximum amount of
interest which may be charged or collected by such Bank Party.
(b) Severability. The provisions of this Agreement are intended to
------------
be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.08. Government Law; Submission to Jurisdiction; Waiver
of Jury Trial; Limitation of Liability.
--------------------------------------------------
(a) GOVERNING LAW. THIS AGREEMENT AND ALL RELATED DOCUMENTS (EXCEPT
-------------
TO THE EXTENT, IF ANY, OTHERWISE EXPRESSLY STATED IN SUCH RELATED DOCUMENTS)
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF
THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
(b) CERTAIN WAIVERS. THE BORROWER HEREBY IRREVOCABLY AND
---------------
UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING
FROM OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT OR ANY
STATEMENT, COURSE OF CONDUCT, ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY "RELATED LITIGATION") MAY BE
BROUGHT
<PAGE>
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IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN
ALLEGHENY COUNTY, PENNSYLVANIA, SUBMITS TO THE JURISDICTION OF SUCH COURTS,
AND, TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT BRING
ANY RELATED LITIGATION IN ANY OTHER FORUM (BUT NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY BANK PARTY TO BRING ANY PERMITTED ACTION, SUIT OR
PROCEEDING IN ANY OTHER FORUM);
(ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE
LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES
ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY
RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE
JURISDICTION OVER THE BORROWER;
(iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED
U.S. MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR NOTICES
DESCRIBED IN SECTION 10.05, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN
SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER
MANNER PERMITTED BY LAW); AND
(iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION.
(c) LIMITATION OF LIABILITY. TO THE FULLEST EXTENT PERMITTED BY LAW,
-----------------------
NO CLAIM MAY BE MADE BY THE BORROWER AGAINST ANY BANK PARTY, OR ANY AFFILIATE,
DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF ANY OF THEM, FOR ANY SPECIAL,
INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM
ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT OR ANY
STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION
HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ON ANY OTHER
THEORY OF LIABILITY). THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO
SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR
ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN
ITS FAVOR.
<PAGE>
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10.09. Prior Understanding.
-------------------
This Agreement and the Related Documents supersede all prior and
contemporaneous understandings and agreements, whether written or oral, among
the parties hereto relating to the transactions provided for herein and therein,
including the Commitment Letter, except for (a) the obligation of the Borrower
to pay the underwriting fee as set forth in the Underwriting Fee Letter
constituting part of the Commitment Letter, and (b) the obligation of the
Borrower to pay the arrangement fee as set forth in the Arrangement Fee Letter
which is a part of the Commitment Letter.
10.10. Duration; Survival.
------------------
All representations and warranties of the Borrower contained herein
and in the Related Documents or made in connection herewith or therewith shall
survive the making of and shall not be waived by the execution and delivery of
this Agreement or any of the Related Documents, any investigation by or
knowledge of any Bank Party, the making of any Loan, the issuance (including any
deemed issuance pursuant to Section 3.10 or arising from any increase or
extension of any outstanding Letter of Credit pursuant to Section 3.03(b)) of
any Letter of Credit or any other event or condition whatsoever. All covenants
and agreements of the Borrower contained herein or in any Related Document shall
continue in full force and effect from and after the date hereof until all
Commitments have terminated, all Letters of Credit have expired or have been
terminated and all other Obligations have been indefeasibly paid in full in
cash. Without limitation, it is understood that all obligations of the Borrower
to make payments to or indemnify the Bank Parties (including obligations arising
under Sections 2.11, 2.12 and 10.06) shall survive the payment in full of all
other Obligations, termination of the Borrower's right to borrow hereunder and
all other events and conditions whatsoever. In addition, all obligations of
each Bank to make payments to or indemnify the Agents, the Issuing Banks or the
Swingline Bank and persons related to the Agents, the Issuing Banks or the
Swingline Bank (including but not limited to obligations arising under Sections
2.11, 2.12, 3.08(c), 3.14(c) and 10.06) shall survive the payment in full by the
Borrower of all other Obligations, termination of the Borrower's right to borrow
hereunder and all other events and conditions whatsoever.
10.11. Counterparts.
------------
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
<PAGE>
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10.12. Successors and Assigns; Participations; Assignments.
---------------------------------------------------
(a) Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the Borrower, the Bank Parties and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights hereunder without the prior written consent of all the Bank
Parties, and any purported assignment without such consent shall be void, and
except that, to the fullest extent permitted by Law, a Bank Party may not
voluntarily assign or transfer any of its rights hereunder except in accordance
with the other provisions of this Section 10.12, and any other purported
voluntary assignment or transfer shall be void; provided that this Agreement
shall inure to the benefit of successors to the Bank parties by operation of Law
or resulting from an involuntary assignment or transfer (including the
appointment of a receiver, conservator, trustee or like person) and any
successor by merger or consolidation. Except to the extent otherwise required by
the context of this Agreement, the word "Bank" or "Bank Party" where used in
this Agreement shall mean and include any holder of any Note originally issued
to any Bank hereunder, and each such holder of a Note shall be bound by and have
the benefits of this Agreement the same as if such holder had been a signatory
hereto.
(b) Participations. Any Bank may, in the ordinary course of its
--------------
business and in accordance with applicable Law, at any time sell to one or more
additional banks or financial institutions ("Participants") participating
interests in all or a portion of any Loan or Letter of Credit Reimbursement
Obligation owing to such Bank, any Note, Letter of Credit Participating Interest
or Swingline Participating Interest held by such Bank, any Commitment of such
Bank or any other interest of such Bank hereunder. In the event of any such
sale by a Bank of participating interests to a Participant, such Bank's
obligations under this Agreement to the other parties to this Agreement and the
Related Documents shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, such Bank shall remain the holder of
any such Note for all purposes of this Agreement and the Related Documents, and
the other parties hereto shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this Agreement
and the Related Documents. The Borrower hereby consents to and confirms the
foregoing arrangements and hereby confirms each Bank's right without notice to
or consent of the Borrower to create or dispose of participations in the
Obligations as contemplated by this Section 10.12(b) (whether such
participations are in the form of partial or complete assignments of such Bank
Party's rights hereunder or under the Related Documents, creation of a debtor-
creditor or trustee-beneficiary relationship between such Bank Party and such
Participants or otherwise). The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.06(f), 2.11, 2.12, 2.13 and 9.06
with respect to its participation in the Commitments and the Loans and Letter of
Credit Reimbursement Obligations outstanding from time to time; provided that no
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Bank would have been entitled to receive in
<PAGE>
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respect of the amount of the participation transferred by such transferor Bank
to such Participant had no such transfer occurred. A Bank may agree with any
Participant not to consent to any amendment to or waiver under this Agreement
which would require the written consent of 100% of the Banks without the consent
of such Participant, but a Bank may not agree with a Participant not to consent
to any other amendment or waiver under this Agreement.
(c) Sales to Purchasing Banks. Any Bank may, in the ordinary course
-------------------------
of its commercial banking business and in accordance with applicable Law, at any
time assign to any other Bank, any affiliate of itself or of any Bank which is
wholly owned by a common parent corporation or, subject to the limitations set
forth in the proviso to this sentence, to one or more additional banks or
financial institutions (collectively "Purchasing Banks") all or any portion of
its rights and obligations under this Agreement and the Related Documents
pursuant to a Commitment and Loan Transfer Supplement, executed by such
Purchasing Bank, such transferor Bank (and, in the case of a Purchasing Bank
that is not then a Bank, by the Borrower, the Issuing Banks and the Agents), and
delivered to the Administrative Agent for its acceptance and recording in the
Register hereinafter referred to as hereinafter provided); provided, however,
that (i) the Commitment purchased by any such Purchasing Bank which is not then
a Bank shall be equal to or greater than $5,000,000 unless such Purchasing Bank
is acquiring 100% of the Commitment of such transferor Bank, (ii) the transferor
Bank which has transferred part of its Commitment constituting less than such
Bank's full Commitment to any such Purchasing Bank which is not then a Bank
shall retain a Commitment, after giving effect to such sale, equal to or greater
than $5,000,000, and (iii) a transfer to any Purchasing Bank which is not then a
Bank shall be made only with the consent of the Borrower and the Agents and, in
the case of the transfer of a Bank's rights under this Agreement appurtenant to
the Revolving Credit Facility, the Issuing Banks and the Swingline Bank (which
in each case shall not be unreasonably withheld). Upon such execution,
delivery, acceptance and recording, from and after the Transfer Effective Date
(determined pursuant to such Commitment and Loan Transfer Supplement), (x) the
Purchasing Bank thereunder shall be a party hereto and, to the extent provided
in such Commitment and Loan Transfer Supplement, have the rights and obligations
of a Bank hereunder with Commitments as set forth therein, and (y) the
transferor Bank thereunder shall, to the extent provided in such Commitment and
Loan Transfer Supplement, be released from its obligations under this Agreement
(and, in the case of a Commitment and Loan Transfer Supplement covering all or
the remaining portion of a transferor Bank's rights and obligations under this
Agreement, such transferor Bank shall cease to be a party hereto; provided,
however, that the provisions of this Agreement and the Related Documents shall
continue to inure to its benefit as to any actions taken or omitted by it while
it was a Bank). Such Commitment and Loan Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Purchasing Bank and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Bank of all or a
<PAGE>
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portion of the rights and obligations of such transferor Bank under this
Agreement and the Related Documents. On or prior to the Transfer Effective
Date, the Borrower, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes of a
transferor Bank a new Note or Notes to the order of such Purchasing Bank in
amounts equal to the Commitment assumed by it pursuant to such Commitment and
Loan Transfer Supplement and, if the transferor Bank has retained a Commitment
hereunder, a new Note or Notes to the order of the transferor Bank in amounts
equal to the Commitment retained by it hereunder. Such new Note or Notes shall
be dated the same dates as the Note or Notes surrendered and shall otherwise be
in the form of the Notes replaced thereby. The Notes surrendered by the
transferor Bank shall be returned by the Administrative Agent to the Borrower
marked "exchanged".
(d) The Register. The Administrative Agent shall maintain at its
------------
office a copy of each Commitment and Loan Transfer Supplement delivered to it
and a register (the "Register") for the recordation of the names and addresses
of the Banks and the Commitment of, and principal amount of the Obligations
owing to, each Bank from time to time. The entries in the Register shall be
conclusive and binding for all purposes, in the absence of manifest error, and
the Borrower and the Bank Parties may treat each person whose name is recorded
in the Register as a Bank for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower or any Bank at any reasonable
time and from time to time upon reasonable prior notice. Upon its receipt of a
Commitment and Loan Transfer Supplement executed by a transferor Bank and a
Purchasing Bank (and, in the case of a Purchasing Bank that is not then a Bank
or an affiliate thereof, by the Borrower and the Agents) together with the Note
or Notes subject to such transfer and payment by the Purchasing Bank to the
Administrative Agent of a registration and processing fee of $3,500 (which shall
be solely for the account of the Administrative Agent), and the Administrative
Agent shall (i) promptly accept such Commitment Transfer Supplement and (ii) on
the Transfer Effective Date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and
recordation to the other Bank Parties and the Borrower.
(e) Agreements of Transferor Bank and Purchasing Bank. By executing
-------------------------------------------------
and delivering a Commitment and Loan Transfer Supplement, the transferor Bank
and the Purchasing Bank confirm to and agree with each other and the other
parties hereto as follows: (i) other than as expressly provided in such
Commitment and Loan Transfer Supplement, the transferor Bank makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or with respect to the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any of the Related
Documents or any other instrument or document furnished pursuant hereto and
thereto; (ii) the transferor Banks makes no representation or warranty and
assumes no responsibility with respect to the financial
<PAGE>
-150-
condition of the Credit Parties or the performance or observance by the Credit
Parties of any of its obligations under this Agreement or any of the Related
Documents or other instruments or documents furnished pursuant hereto or
thereto; (iii) the Purchasing Bank confirms that it has received a copy of this
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Commitment and
Loan Transfer Supplement; (iv) the Purchasing Bank will, independently and
without reliance upon the Administrative Agent, the transferor Bank or any other
Bank Party, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement and the Related Documents; (v) the Purchasing
Bank agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the Related Documents are
required to be performed by it as a Bank; (vi) the Purchasing Bank agrees that
such Commitment and Loan Transfer Supplement is taken by it without recourse to
the transferor Bank.
(f) Financial and Other Information. The Borrower hereby authorizes
-------------------------------
each Bank to disclose to any prospective Participant or Purchasing Bank (each a
"Transferee") or any potential Transferee any and all financial and other
information in such Bank's possession concerning the Borrower and its
Subsidiaries and Affiliates which has been or may be delivered to such Bank by
or on behalf of the Borrower pursuant to this Agreement or any of the Related
Documents or which has been or may be delivered to such Bank by or on behalf of
the Borrower in connection with such Bank's credit evaluation of the Borrower
and its Subsidiaries and Affiliates prior to becoming a party to this Agreement.
At the request of any Bank, the Borrower, at the Borrower's expense, shall
provide to each prospective Transferee the conformed copies of documents
referred to in Section 6(c) of the form of Transfer Supplement.
(g) Taxes. Each Bank which is incorporated or organized under the
-----
laws of any jurisdiction other than the United States or any state thereof
agrees that, on or prior to the date any payment is due to be made to it
hereunder or under any Related Document, it will furnish to the Borrower and the
Administrative Agent two valid, duly completed copies of (i) United States
Internal Revenue Service Form 4224 or 1001, or (ii) in the case of a Bank that
is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and
cannot deliver IRS Form 4224 or 1001, IRS Form W-8 and a certificate confirming
that such Bank is not a "Bank" for purposes of Section 881(c)(3)(A), or any
successor applicable form, as the case may be, certifying that such Bank is
entitled to a complete exemption from U.S. withholding tax with respect to (x)
in the case of clause (i) above, all payments, and (y) in the case of clause
(ii) above, payments of interest, to be made under this Agreement and the
Related Documents. Each Bank which so delivers to the Borrower and the
Administrative Agent an Internal Revenue Service Form 1001, 4224 or W-8, or a
successor applicable form, agrees to deliver to the Borrower and the
Administrative Agent two further copies of the said
<PAGE>
-151-
Internal Revenue Service Form 1001, 4224 or W-8 or a successor applicable form,
or other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or otherwise is required to be
resubmitted as a condition to obtaining an exemption from withholding tax, or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it, and such extensions or renewals thereof as may
reasonably be requested by the Borrower or the Administrative Agent, certifying
that such Bank is entitled to a complete exemption from or reduction in United
States withholding tax with respect to payments under this Agreement or any
Related Document, unless in any such cases an event (including any change in
law) has occurred prior to the date on which any such delivery would otherwise
be required which renders all such forms inapplicable or which would prevent
such Bank from duly completing and delivering any such form with respect to it
and such Bank advises the Borrower and the Administrative Agent that it is not
capable of delivering any such form or certificate, in which case such Bank
shall not be required or have any obligation to deliver any such form or
certificate. In addition, if at any time the Borrower believes that payments to
any Bank (foreign or domestic) may be subject to U.S. backup withholding tax,
such Bank shall, at the Borrower's reasonable request from time to time, if such
Bank is legally able to do so, provide the Borrower with evidence establishing
an exemption from U.S. backup withholding tax.
(h) Assignments to Federal Reserve Bank. Any Bank may at any time
-----------------------------------
assign all or any portion of its rights under this Agreement, including any
Obligation owing to it and any Note held by it, to a Federal Reserve Bank. No
such assignment shall relieve the transferor Bank from any of its obligations
hereunder.
10.13. Replacement of Bank.
-------------------
If at any time the all-in interest cost to the Borrower including any
increased costs imposed on the Borrower pursuant to Section 2.11(a) being paid
to any Bank becomes greater than 125% of the amount determined by multiplying
(a) the aggregate all-in interest cost to the Borrower (including such increased
costs) being paid to all of the Banks times (b) the Commitment Proportion of
such Bank, the Borrower may at its option replace such Bank with another
commercial lending institution by giving notice to the Bank Parties stating that
the Borrower wishes to replace such Bank and giving the name of the replacement
commercial lending institution, which replacement institution shall be
satisfactory to the remaining Bank Parties in their reasonable discretion. Any
such replacement shall not be deemed to be a prepayment for any purpose hereof,
except that the Borrower shall pay to the Bank being replaced any payment
required to be made pursuant to Section 2.11(b) as if such replacement
constituted a prepayment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Agreement as of the date first
above written.
Attest: KOPPERS INDUSTRIES, INC.
By /s/ Randall Collins By /s/ M. Claire Schaming
------------------------ -------------------------
Title VP and Secretary Title Treasurer
--------------------- ----------------------
[CORPORATE SEAL]
Address for notices:
Koppers Building
436 Seventh Avenue
Pittsburgh, PA 15219
Attention: Claire Schaming
Telephone No.: (412) 227-2472
Facsimile No.: (412) 227-2159
SBC WARBURG DILLON READ INC., as
Arranger and Syndication Agent
By /s/ Wendy P. Field
---------------------------
Title Executive Diretor
Loan Syndications
------------------------
By /s/ Reco Jenal
---------------------------
Title Director
Banking Finance
------------------------
Address for Notices:
677 Washington Blvd.
Stamford, CT 06912
Attn.: Aida Kalla
Telephone No.: (203) 719-8026
Facsimile No.: (203) 719-8610
SWISS BANK CORPORATION,
STAMFORD BRANCH,
individually and as Documentation Agent
<PAGE>
By /s/ Wendy P. Field
---------------------------
Title Executive Director
Loan Syndications
------------------------
By /s/ Dorothy L. McKinley
---------------------------
Title Associate Director
------------------------
Banking Finance
Support, N.A.
Address for Notices:
677 Washington Blvd.
Stamford, CT 06912
Attention: Denise Clerkin
Telephone No.: (203) 719-3146
Facsimile No.: (203) 719-4176
MELLON BANK, N.A.,
individually and as
Administrative and Collateral Agent
By /s/ John K. Walsh
---------------------------
Title Vice President
--------------------------
Address for Notices:
One Mellon Bank Center
Pittsburgh, PA 15258-0001
Attention: John K. Walsh
Telephone No.: (412) 234-8479
Facsimile No.: (412) 234-8888
with a copy to:
Three Mellon Bank Center
Pittsburgh, PA 15258-0003
Attention: Loan Administration
Telephone No.: (412) 234-7366
Facsimile No.: (412) 234-2027
<PAGE>
Schedule 5.01(xxxiv)
Certain documents to be delivered in form and substance satisfactory to the
---------------------------------------------------------------------------
Agents
------
Stockholder's Agreement
Senior Subordinated Note Documents
Australian Credit Facilities and the ancillary documents thereto
Exchange Agreement
Waiver BHP to Section 8.10(d) of the BHP Agreement
Advisory Services Agreement
Koppers Industries, Inc. Employee Stock Purchase Plan
Koppers Industries, Inc. Stock Redemption and Purchase Plan
<PAGE>
Exhibit 10.29
ADVISORY SERVICES AGREEMENT
---------------------------
This Advisory Services Agreement (the "Agreement") is made as of
December 1, 1997 by and between Koppers Industries, Inc., a Pennsylvania
corporation (the "Company"), and Saratoga Partners III, L.P., a Delaware limited
partnership ("Saratoga").
WHEREAS, the Company desired to retain Saratoga and Saratoga desired
to perform for the Company certain services;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties agree as follows:
Section 1. Term. This Agreement shall be in effect for so long as
----
Saratoga is entitled to elect a majority of the direc tors of the Company,
unless earlier terminated by written agreement between the Company and Saratoga
(the "Term").
Section 2. Services. Saratoga shall perform or cause to be performed
--------
such services for the Company as directed by the Board of Directors of the
Company (the "Board") and agreed upon by Saratoga, which may include the
following:
(a) identification, negotiation and analysis of acquisitions and
dispositions by the Company or its subsidiaries;
(b) negotiation and analysis of financing alternatives, including,
without limitation, in connection with acquisitions, capital expenditures and
refinancing of indebtedness;
(c) finance functions, including assistance in the of financial
projections;
(d) human resource functions, including searching and hiring of
executives; and
(e) other services for the Company upon which the Board and Saratoga
agree.
Section 3. Payment of Fees. The Company hereby agrees to:
---------------
(a) pay to Saratoga on the date of this Agreement a fee in the amount
of $700,000 in connection with the recapitalization of the Company to be
consummated on the date of this Agreement (the "Recapitalization");
(b) during the Term, pay an advisory fee to Saratoga (or its
designee) in an amount equal to $600,000 per annum, such fee being payable
quarterly in arrears in equal installments of
<PAGE>
-2-
$150,000 on each January 15, April 15, July 15, October 15, commencing January
15, 1998; and
(c) during the Term, if it elects to engage Saratoga (or its
designee) to be its advisor in connection with any acquisition, disposition,
business combination, financing or other extraordinary corporate transaction
involving the Company or any of its subsidiaries, pay to Saratoga (or its
designee) a customary fee in connection therewith.
Each payment made pursuant to this Section 3 shall be paid by wire
transfer of immediately available federal funds to the account(s) specified
therefor by Saratoga.
Section 4. Expenses. The Company hereby agrees to pay on demand all
--------
expenses incurred by Saratoga in connection with the transactions contemplated
by this Agreement and all reasonable expenses incurred by members of the Board
(or any committee thereof) designated by Saratoga in connection with the
performance of their Board (or committee) duties.
Section 5. Indemnity and Liability. In consideration of the
-----------------------
execution and delivery of this Agreement by Saratoga, the Company hereby agrees
to indemnify, exonerate and hold each of Saratoga and its affiliates, and each
of their respective partners, shareholders, affiliates, directors, officers,
fiduciaries, employees and agents and each of the partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and agents of each of
the foregoing (collectively, the "Indemnitees") free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities and
damages, and expenses in connection therewith, including without limitation
reasonable attorneys' fees and disbursements (collectively, the "Indemnified
Liabilities"), incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to the Recapitalization, the execution, delivery,
performance, enforcement or existence of this Agreement or the transactions
contemplated hereby or thereby except for any such Indemnified Liabilities
arising solely on account of such In demnitee's gross negligence or willful
misconduct, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. None of the Indemnitees
shall be liable to the Company or any of its affiliates for any act or omission
suffered or taken by such Indemnitee that does not constitute gross negligence
or willful misconduct.
<PAGE>
-3-
Section 6. Miscellaneous. (a) No amendment or waiver of any term,
-------------
provision or condition of this Agreement shall be effective, unless in writing
and executed by each of Saratoga and the Company. No waiver on any one occasion
shall extend to or effect or be construed as a waiver of any right or remedy on
any future occasion. No course of dealing of any person nor any delay or
omission in exercising any right or remedy shall constitute an amendment of this
Agreement or a waiver of any right or remedy of any party hereto.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any other jurisdiction. Any dispute or controversy which arises
under this Agreement shall be resolved in accordance with the terms of
arbitration set forth on Exhibit 1 hereto.
(c) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any prior communication
or agreement with respect thereto.
(d) All notices, demands, and communications of any kind which any
party may require or desire to serve upon any other party under this Agreement
shall be in writing and shall be served upon such other party as specified below
by personal delivery to the address set forth for it below or to such other
address as such party shall have specified by notice to each other party or by
mailing a copy thereof by certified or registered mail, or by any reputable
overnight courier service, postage prepaid, with return receipt requested,
addressed to such party and copied persons at such addresses. In the case of
service by personal delivery, it shall be deemed complete on the first business
day after the date of actual delivery to such address. In case of service by
mail or by overnight courier, it shall be deemed complete, whether or not
received, on the third day after the date of mailing as shown by the registered
or certified mail receipt or courier service receipt. Notwithstanding the
foregoing, notice to any party or copied person of change of address shall be
deemed complete only upon actual receipt by an officer or agent of such party or
copied person.
<PAGE>
-4-
If to the Company, at:
Koppers Industries Inc.
436 Seventh Avenue
Pittsburgh, Pennsylvania 15219
Attention: Robert Wagner
Copy to:
Dickie, McCamey & Chilcote, P.C.
Two PPG Place, Ste. 400
Pittsburgh, PA 15222
Attention: Clayton A. Sweeney, Esq.
If to Saratoga, at:
Saratoga Partners III, L.P.
535 Madison Avenue
New York, New York 10022
Attention: Christian L. Oberbeck
(e) If in any judicial proceedings a court shall refuse to enforce
any provision of this Agreement, then such unenforceable provision shall be
deemed eliminated from this Agreement for the purpose of such proceedings to the
extent necessary to permit the remaining provisions to be enforced.
(f) This Agreement may be executed in any number of counterparts and
by each of the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
<PAGE>
-5-
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf as of the date first above written by its officer or
representative thereunto duly authorized.
KOPPERS INDUSTRIES, INC.
/s/ Robert K. Wagner
By:__________________________________
Name:
Title:
SARATOGA PARTNERS III, L.P.
By: DR Associates IV, L.P.,
Its General Partner
By: Dillon, Read Inc.,
Its General Partner
/s/ Christian L. Oberbeck
By:__________________________________
Name:
Title:
<PAGE>
Exhibit 1
If a dispute or controversy arises under or in connection with this
Agreement, the parties agree first to try in good faith to settle the dispute or
controversy. Any party may initiate the negotiation process by written notice
to the others, identifying the dispute or controversy and the desire for
negotiation. If the parties have not resolved the dispute or controversy by
direct negotiations within thirty (30) days of such notice, any party may
initiate arbitration as herein provided. All disputes or controversies arising
under or in connection with this Agreement which are not resolved by negotiation
shall be decided by arbitration before a single arbitrator selected by agreement
of the parties, and judgment upon the award or decision of the arbitrator may be
entered and enforced in any court of competent jurisdiction. It is specifically
intended by the parties that any equitable relief granted by an arbitrator may
be enforced in any court of competent jurisdiction. The forum of such
arbitration shall be in Pittsburgh, Pennsylvania to the exclusion of all other
jurisdictions. In the event that the parties cannot agree upon the selection of
an arbitrator, the parties agree that the American Arbitration Association in
Pittsburgh, Pennsylvania will select the arbitrator.
Arbitration Process. The arbitrator shall decide the dispute or
-------------------
controversy in accordance with the following procedures:
Within ten (10) days of the selection of an arbitrator, each party
shall submit to the arbitrator its written position (the "Initial Submission"),
provided that neither memorandum of position shall exceed 10 pages, double
- --------
spaced, plus such other documentary evidence as the parties deem necessary.
Within ten (10) days of the delivery of the Initial Submission, each
party may submit to the arbitrator and the other party a reply memorandum (the
"Reply Submission"), provided that neither reply memorandum shall exceed 5
--------
pages, double spaced. In connection with the Reply Submission, neither of the
parties may submit (and the arbitrator may not accept) any additional
documentation (including affidavits).
Within ten (10) days of the expiration of the period for the delivery
of the Reply Submission, the arbitrator, if he or she deems it necessary or
advisable, may call a hearing which may be by telephone conference (the
"Hearing"). At any Hearing, the arbitrator may ask representatives and counsel
for the parties' questions with respect to the issue to be decided and positions
of the parties. In connection with the Hearing, neither of the parties may
offer (and the arbitrator may not accept) any testimony or additional
documentation (including affidavits).
<PAGE>
-2-
Within seven (7) days after the later to occur, if such is to occur,
of (a) the Hearing or (b) the Reply Submission, the arbitrator shall render his
or her position.
The arbitrator shall promptly notify the parties in writing of the
decision, together with the amount of any dispute resolution costs arising with
respect thereto (the "Notice of Decision"). The Notice of Decision need not
contain an explanation of the decision or grounds therefor.
The decision of the arbitrator shall be final, binding and not subject
to appeal.
All dispute resolution costs, which shall include any fee for the
arbitrator for services rendered, shall be borne equally by the parties. Each
party is to pay its own counsel fees and expenses.
<PAGE>
EXHIBIT 11.1
KOPPERS INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS PER
SHARE:
Voting common stock
outstanding............ 5,715,225 5,686,029 5,545,030 5,351,907 5,290,151
Non-Voting common stock
outstanding............ -- -- -- 2,338,200 3,867,749
Series B Junior
Convertible Preferred
Stock.................. 2,340,000 2,340,000 2,340,000 2,340,000 --
Common stock
equivalents............ 1,964,574 2,008,377 2,685,741 346,551 461,813
----------- ----------- ----------- ----------- ----------
Common stock
outstanding, including
convertible securities. 10,019,799 10,034,406 10,570,971 10,376,658 9,619,713
Net income (loss) to
common stockholders
(000's)................ $ 8,492 $ (2,494) $ 10,158 $ 24,440 $ 14,098
Primary earnings (loss)
per common share....... $ 0.85 $ (0.25) $ 0.96 $ 2.36 $ 1.47
=========== =========== =========== =========== ==========
FULLY DILUTED EARNINGS
PER SHARE:
Voting common stock
outstanding............ 5,715,225 5,686,029 5,545,230 5,351,907 5,290,151
Non-Voting common stock
outstanding............ -- -- -- 2,338,200 3,867,749
Series B Junior
Convertible Preferred
Stock.................. 2,340,000 2,340,000 2,340,000 2,340,000 --
Common stock
equivalents............ 2,042,802 1,955,466 2,685,741 371,616 485,518
----------- ----------- ----------- ----------- ----------
Common stock
outstanding, including
convertible securities. 10,098,027 9,981,495 10,570,971 10,401,723 9,643,418
Net income (loss) to
common stockholders
(000's)................ $ 8,492 $ (2,494) $ 10,158 $ 24,440 $ 14,098
Fully diluted earnings
(loss) per common
share.................. $ 0.84 $ (.25) $ 0.96 $ 2.35 $ 1.46
=========== =========== =========== =========== ==========
</TABLE>
Each share of the former Series B Junior Convertible Preferred Stock was
assumed to have been converted into Non-Voting Common Stock. Common stock
equivalents include stock options granted to management, and stock warrants
granted to certain lenders prior to their exercise in 1995. Each stock option
awarded to management gives the holder the right to purchase an equivalent
amount of common stock at the listed exercise price and becomes exercisable in
increments of one third per year over a total vesting period of three years
from the date of grant. During 1995 all of the remaining stock warrants were
exercised in exchange for 2,399,850 shares of non-voting common stock for
$1.11 each, 61,650 of which were subsequently repurchased and retired. Net
income available to common stockholders prior to 1995 is net of dividends
accrued on the Series A Exchangeable Preferred Stock.
<PAGE>
EXHIBIT 11.1 (CONT.)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
----------------------
1996 1997
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Voting common stock outstanding......................... 5,291,865 5,179,910
Non-Voting common stock outstanding..................... 3,948,182 3,628,200
Common stock equivalents................................ 462,506 439,197
---------- -----------
Common stock outstanding, including convertible
securities........................................... 9,702,553 9,247,307
Net income to common stockholders (000's)............... $ 5,527 $ 22,159
Primary earnings per common share..................... $ 0.57 $ 2.40
========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Voting common stock outstanding......................... 5,291,865 5,179,910
Non-Voting common stock outstanding..................... 3,948,182 3,628,200
Common stock equivalents................................ 462,506 439,197
---------- -----------
Common stock outstanding, including convertible
securities........................................... 9,702,553 9,247,307
Net income to common stockholders (000's)............... $ 5,527 $ 22,159
Fully diluted earnings per common share............... $ 0.57 $ 2.40
========== ===========
</TABLE>
Common stock equivalents include stock options granted to management and
stock warrants granted to certain lenders. Each stock option awarded to
management gives the holder the right to purchase an equivalent amount of
common stock at the listed exercise price and becomes exercisable in
increments of one third per year over a total vesting period of three years
from the date of grant.
<PAGE>
EXHIBIT 12.1
KOPPERS INDUSTRIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
NINE MONTHS ENDED 1997 1997
YEARS ENDED DECEMBER 31, SEPTEMBER 30, PRO FORMA PRO FORMA
------------------------------------------- ------------------ ------------- -------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income before taxes..... $22,840 $16,973 $17,934 $34,403 $7,959 $5,113 $22,863 $19,143 $22,133
Fixed charges:
Interest expense....... 13,949 13,177 13,620 15,060 16,636 12,462 12,387 23,625 31,500
Interest portion of
rent expense.......... 3,618 3,786 4,227 4,535 5,550 4,107 4,277 4,459 5,953
------- ------- ------- ------- ------- -------- -------- ------- -------
Total fixed charges..... $17,567 $16,963 $17,847 $19,595 $22,186 $16,569 $16,664 $28,084 $37,453
Income before taxes plus
fixed charges.......... $40,407 $33,936 $35,781 $53,998 $30,145 $21,682 $39,527 $47,227 $59,586
Ratio of earnings to
fixed charges.......... 2.30x 2.00x 2.00x 2.76x 1.36x 1.31x 2.37x 1.68x 1.59x
======= ======= ======= ======= ======= ======== ======== ======= =======
</TABLE>
<PAGE>
Exhibit 21.1
AMENDED LIST OF SUBSIDIARIES
----------------------------
State or
Country of
Incorporation
-------------
Koppers Industries BW, Inc. Delaware
Concrete Partners, Inc. Delaware
Koppers Concrete Products, Inc. Delaware
Koppers Industries International Barbados
Trade Corporation
World-Wide Ventures Corporation Delaware
KHC Assurance, Inc. Vermont
Koppers Industries of Delaware
Delaware, Inc.
Koppers Australia Pty. Ltd. Australia
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm under the captions "Summary
Historical and Pro Forma Consolidated Financial Information", "Selected
Historical Consolidated Financial Information" and "Experts" and to the use of
our reports dated February 18, 1997 in the Registration Statement (Form S-4)
and the related Prospectus of Koppers Industries, Inc. for the registration of
the Senior Subordinated Notes.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
December 22, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITOR
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated August 25, 1997 in the Registration Statement
(Form S-4) and the related Prospectus of Koppers Industries, Inc. for the
registration of the Senior Subordinated Notes.
/s/ Ernst & Young
Sydney, Australia
December 22, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF BAKER & McKENZIE
We consent to having Baker & McKenzie named in the "Enforceability of
Judgments" section of the Koppers Industries, Inc. Form S-4.
/s/ Baker & McKenzie
Melbourne VIC 3000 Australia
December 22, 1997
<PAGE>
Exhibit 25.1
________________________________________________________________________________
________________________________________________________________________________
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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) ___
PNC BANK, NATIONAL ASSOCIATION
(Exact Name of Trustee as Specified in its Charter)
NOT APPLICABLE
(Jurisdiction of incorporation or
organization if not a U.S. national bank)
25-1146430
(I.R.S. Employer Identification No.)
One PNC Plaza
Fifth Avenue and Wood Street, Pittsburgh, Pennsylvania 15222
(Address of principal executive offices - Zip code)
F. J. Deramo, Vice President, PNC Bank, National Association
27th Floor, One Oliver Plaza, Pittsburgh, Pennsylvania 15222-2602
(412) 762-3666
(Name, address and telephone number of agent for service)
KOPPERS INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
Pennsylvania
(State or other jurisdiction of incorporation or organization)
25-1588399
(I.R.S. Employer Identification No.)
436 Seventh Avenue
Pittsburgh, Pennsylvania 15219
(Address of principal executive offices - Zip code)
9 7/8% Senior Subordinated Notes Due 2007
(Title of the indenture securities)
______________________________________________________________________________
<PAGE>
Item 1. General information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of Cleveland Cleveland, Ohio
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes. (See Exhibit T-1-3)
Item 2. Affiliations with obligor and underwriters.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
Neither the obligor nor any underwriter for the obligor is an
affiliate of the trustee.
Item 3 through Item 14.
The issuer currently is not in default under any of its outstanding
securities for which PNC Bank is trustee. Accordingly, responses to Items
3 through 14 of Form T-1 are not required pursuant to Form T-1 General
Instructions B.
Item 15. Foreign trustee.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under the indentures qualified or to be
qualified under the Act.
Not applicable (trustee is not a foreign trustee).
Item 16. List of exhibits.
List below all exhibits filed as part of this statement of eligibility.
Exhibit T-1-1 - Articles of Association of the trustee, as presently in
effect.
Exhibit T-1-2 - Copy of Certificate of the Authority of the Trustee to
Commence Business, filed as Exhibit 2 to Trustee's
Statement of Eligibility and Qualification, Registration
No. 2-58789 and incorporated herein by reference.
Exhibit T-1-3 - Copy of Certificate as to Authority of the Trustee to
Exercise Trust Powers, filed as Exhibit 3 to Trustee's
Statement of Eligibility and Qualification, Registration
No. 2-58789, and incorporated herein by reference.
-2-
<PAGE>
Exhibit T-1-4 - The By-Laws of the trustee, filed as Exhibit 4 to
Trustee's Statement of Eligibility and Qualification,
Registration No. 333-28711 and incorporated herein by
reference.
Exhibit T-1-5 - The consent of the trustee required by Section 321(b) of
the Act.
Exhibit T-1-6 - The copy of the Balance Sheet taken from the latest
Report of Condition of the trustee published in response
to call made by Comptroller of the Currency under Section
5211 U.S. Revised Statutes.
NOTE
The answers to this statement, insofar as such answers relate to (a) what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or are owners of 10% or more
of the voting securities of the obligor, or are affiliates or directors or
executive officers of the obligor, and (b) the voting securities of the trustee
owned beneficially by the obligor and each director and executive officer of the
obligor, are based upon information furnished to the trustee by the obligor and
also, in the case of (b) above, upon an examination of the trustee's records.
While the trustee has no reason to doubt the accuracy of any such information
furnished by the obligor, it cannot accept any responsibility therefor.
------------------------------------------
Signature appears on next page
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
PNC Bank, National Association, a corporation organized and existing under the
laws of the United States of America, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Pittsburgh and Commonwealth of Pennsylvania on
December __, 1997.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Mark A. Rullo
___________________________________
Mark A. Rullo
Vice President
-4-
<PAGE>
EXHIBIT T-1-1
ARTICLES OF ASSOCIATION
PNC BANK, NATIONAL ASSOCIATION
(Amended and Restated as of September 15, 1997)
FIRST: The title of this Association shall be "PNC Bank, National
Association."
SECOND: The main office of the Association shall be in the City of
Pittsburgh, Allegheny County, Pennsylvania. The general business of the
Association shall be conducted at its main office and its branches.
THIRD: The Board of Directors of the Association shall consist of not
fewer than five (5) nor more than twenty-five (25) persons, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time to time by a resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof. Each
Director shall own such minimum qualifying equity interest in the ultimate
parent bank holding company of the Association as shall be required from time to
time by applicable law or regulation. Unless otherwise provided by the laws of
the United States, any vacancy in the Board of Directors for any reason,
including an increase in the number thereof, may be filled by action of the
Board of Directors, within the limits then specified by law.
A majority of the Board of Directors then in office shall be necessary
to constitute a quorum for the transaction of business at any meeting of the
Board.
FOURTH: The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office or such other place as the Board
of Directors may designate, on the day of each year specified therefor in the
By-Laws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the Board of
Directors. Any action which may be taken at a meeting of the shareholders of
the Association may be taken without a meeting if a consent in writing setting
forth the action so taken is signed by all the shareholders who would be
entitled to vote at a meeting for such purpose.
<PAGE>
Terms of Directors, including Directors selected to fill vacancies,
shall expire at the regular meeting of shareholders at which Directors are
elected, unless a Director resigns or is removed from office prior to the date
of such meeting.
Despite the expiration of a Director's term, the Director shall
continue to serve until his or her successor is elected and qualifies or until
there is a decrease in the number of Directors and his or her position is
eliminated.
A Director may resign at any time by delivering written notice to the
Board of Directors, its Chairman, or to the Association's Secretary, which
resignation shall be effective when the notice is delivered unless the notice
specifies a later effective date.
FIFTH: The amount of the authorized capital stock of the Association
shall be Two Hundred Eighteen Million Nine Hundred Eighteen Thousand, Five
Hundred and Seventy Dollars ($218,918,570), divided into 6,735,956 shares of
common stock of the par value of Thirty-Two Dollars and Fifty Cents ($32.50)
each, but said capital stock may be increased or decreased from time to time in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have any preemptive or preferential right of subscription to
any shares of any class of stock of the Association, whether now or hereafter
authorized, or to any obligations convertible into stock of the Association,
issued or sold, nor any right of subscription to any thereof other than such, if
any, as the Board of Directors, in its discretion, may from time to time
determine and at such price as the Board of Directors may from time to time fix.
The Association, at any time and from time to time, may authorize and
issue debt obligations, whether or not subordinated, without the approval of the
shareholders.
SIXTH: The Board of Directors shall appoint one of its members
President of the Association who shall be Chairman of the Board; but the Board
of Directors may appoint a Director, in lieu of the President, to be Chairman of
the Board, who shall perform such duties as may be designated by the Board of
Directors. The Board of Directors shall have the power to appoint one or more
Vice Presidents of various ranks; to appoint a Cashier, a Secretary, and such
other officers and employees
-6-
<PAGE>
as may be required or deemed advisable to transact the business of the
Association; to fix the salaries to be paid such officers and employees; to
dismiss at its pleasure such officers and employees and to appoint others to
take their place.
The business and affairs of the Association shall be managed by or
under the direction of the Board of Directors. The Board of Directors shall
have the power to define the duties of officers and employees of the Association
and to require adequate bonds from them for the faithful performance of their
duties; to make all By-Laws and adopt all resolutions that may be lawful for the
general regulation of the business of the Association and the management of its
affairs, including but not limited to, the manner of election or appointment of
Directors, officers, or employees and the appointment of judges of election, and
generally to do and perform all acts that may be lawful for a Board of Directors
to do and perform. Notwithstanding any provision of this or any other Article,
the Board of Directors may delegate to the management of the Association such
authorities and powers as the Board of Directors deems advisable from time to
time, to the fullest extent permitted by applicable laws, regulations, and safe
and sound banking practices.
SEVENTH: (a) Subject to any prohibitions or limitations set forth in
sections (b) and (g) of this Article or the Association's By-Laws, the
Association may indemnify or reimburse any Director, officer, or employee for,
or advance amounts in payment of, any expenses actually and reasonably incurred
in any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative, or investigative, to which such individual was or is a
party or a potential party by reason of his or her performance of official
duties on behalf of or at the request of the Association. Such duties shall
specifically include, but not be limited to, service performed at the request of
the Association as a representative of a domestic or foreign corporation for
profit or not-for-profit, partnership, joint venture, trust or other enterprise.
For purposes of this Article, "expenses" shall include, but not be limited to,
attorneys' fees and costs, judgments, fines, taxes, penalties, and amounts paid
or to be paid in settlement.
(b) Notwithstanding any provision of this Article or the
Association's By-Laws, the following prohibitions and limitations shall apply:
(i) No indemnification
-7-
<PAGE>
shall be made in any case where the act or failure to act giving rise to the
claim for indemnification is determined by a court of competent jurisdiction to
have constituted willful misconduct or recklessness; (ii) No indemnification
shall be made for any expenses incurred in an administrative proceeding or civil
action instituted by a federal banking agency which proceeding or action results
in a final order or settlement pursuant to which the Director, officer or
employee is assessed a civil money penalty; removed from office or prohibited
from participating in the conduct of the Association's affairs; or is required
to cease and desist from or take any affirmative action described in Section
8(b) of the Federal Deposit Insurance Act with respect to the Association; (iii)
The Association may advance expenses to a Director, officer or employee in
connection with an action or proceeding under 12 U.S.C. (S)(S)164 or 1818 only
if the Board of Directors has first made such determinations and findings and
otherwise satisfied such procedural requirements, if any, as may be specified by
rule, regulation, advice, or guidance issued by a federal banking agency having
jurisdiction over the Association; (iv) Any advance of expenses must be subject
to a written and legally binding agreement which specifies, at a minimum, that
reimbursement to the Association of expenses advanced (including expenses
already paid) shall be required if and to the extent that: (a) the expenses are
not covered by any insurance policy or fidelity bond purchased by the
Association or its holding company; (b) the Board of Directors finds that the
Director, officer, or employee willfully misrepresented factors relevant to the
Board's decision to advance expenses; or (c) for any other reason the expenses
advanced subsequently become prohibited indemnification payments, as defined in
12 C.F.R. (S)359.1(1); and (v) No indemnification shall be made with respect to
amounts provided for by any compromise settlement unless such settlement shall
have been approved by a court of competent jurisdiction, or the holders of
record of a majority of the outstanding shares of the Association, or the Board
of Directors, acting by vote of Directors not parties to the same or
substantially the same action, or proceeding, constituting a majority of the
whole number of Directors.
(c) The Association may provide for the payment of reasonable
premiums for insurance policies or fidelity bonds covering the payment of
expenses and the liabilities
-8-
<PAGE>
of its Directors, officers, and employees, provided that no such insurance or
fidelity bond coverage may be purchased for a final order assessing any judgment
or civil money penalty against such individuals in an administrative proceeding
or civil action commenced by a federal banking agency.
(d) Any amendment or repeal of this Article, or the adoption of any
other provision of the Articles of Association or By-Laws which has the effect
of increasing the liability of the Association's Directors, officers, and
employees shall operate prospectively only and shall not affect any action
taken, or any failure to act, prior to the adoption of such amendment, repeal or
other provisions.
(e) The Board of Directors may adopt By-Law provisions consistent
with this Article and may limit the classes of individuals to whom this Article
shall apply. In the event of any inconsistency or conflict between this Article
and such By-Law provisions, this Article shall control; provided, that a By-Law
provision limiting the classes of individuals to whom this Article shall apply
shall not be deemed to be such an inconsistency or conflict.
(f) The rights of indemnification or reimbursement provided for in
this Article shall not be exclusive of other rights, if any, to which such
Directors, officers, or employees, or their personal representatives, may be
entitled as a matter of Pennsylvania law.
(g) Notwithstanding any other provision of this Article or the
Association's By-Laws, the Association shall not make or agree to make any
prohibited indemnification payment, as defined in 12 C.F.R. (S)359.1(1).
EIGHTH: The Board of Directors shall have the power, without the
approval of the shareholders, to change the location of the main office to any
other place within the limits of the City of Pittsburgh, Allegheny County,
Pennsylvania, and to establish or change the location of any branch or branches
of the Association subject to the approval of the Comptroller of the Currency.
NINTH: The corporate existence of the Association shall continue
until terminated in accordance with the laws of the United States.
TENTH: The Board of Directors of the Association, or any three (3) or
more shareholders owning, in the aggregate, not less than ten (10%) percent of
the stock of the Association, may call
-9-
<PAGE>
a special meeting of the shareholders at any time. Unless otherwise provided by
the laws of the United States or duly waived, a notice of the time, place, and
purpose of every annual and every special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten (10) days prior
to the date of such meeting to each shareholder of record at his address as
shown upon the books of the Association.
ELEVENTH: These Articles of Association may be amended at any regular
or special meeting of the shareholders by the affirmative vote of the holders of
a majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
TWELFTH: Honorary or advisory directors, without voting power or
power of final decision in matters concerning the business of the Association,
may be appointed by resolution of a majority of the full Board of Directors, or
by resolution of shareholders at any annual or special meeting. Honorary or
advisory directors shall not be counted to determine the number of Directors of
the Association or the presence of a quorum in connection with any Board action
and shall not be required to own a qualifying equity interest. Honorary or
advisory directors may be appointed to one or more advisory boards of directors
of the Association, to serve upon such terms and conditions as may be specified
by the Board of Directors, or the Association's By-Laws.
-10-
<PAGE>
EXHIBIT T-1-5
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended by the Trust Indenture Reform Act of 1990, in connection
with the proposed issuance by Koppers Industries, Inc, of its 9 7/8% Senior
Subordinated Notes Due 2007, 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.
PNC BANK, NATIONAL ASSOCIATION
(Trustee)
By /s/ Mark A. Rullo
___________________________________
Mark A. Rullo
Vice President
Dated: December 15, 1997
<PAGE>
EXHIBIT T-1-6
SCHEDULE RC - BALANCE SHEET
FROM
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of
PNC BANK, NATIONAL ASSOCIATION
of PITTSBURGH in the state of PENNSYLVANIA
at the close of business on
September 30, 1997
filed in response to call made by
Comptroller of the Currency,
under title 12, United States Code, Section 161
Charter Number 540
Comptroller of the Currency Northeastern District
BALANCE SHEET
<TABLE>
<CAPTION>
Thousands
of Dollars
----------
ASSETS
<S> <C> <C>
Cash and balances due from depository institutions
Noninterest-bearing balances and currency and coin....... $ 3,291,380
Interest-Bearing Balances................................ 122,778
Securities
Held-to-maturity securities.............................. 0
Available-for-sale securities............................ 5,669,736
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds sold and
Securities purchased under agreements to resell.......... 869,038
Loans and lease financing receivables:
Loans and leases, net of unearned income $44,571,048
LESS: Allowance for loan and lease losses 812,830
LESS: Allocated transfer risk reserve 0
Loans and leases, net of unearned income,
allowance and reserve.................................. 43,758,218
Trading assets............................................ 134,154
Premises and fixed assets (including capitalized leases).. 716,561
Other real estate owned................................... 50,869
Investments in unconsolidated subsidiaries and
associated companies..................................... 3,679
Customers' liability to this bank on acceptances
outstanding.............................................. 50,248
Intangible assets......................................... 1,575,419
Other assets.............................................. 1,406,879
-----------
Total Assets............................................. $57,648,959
===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices............................................... $34,197,693
Noninterest-bearing $ 8,472,726
Interest-bearing 25,724,967
In foreign offices, Edge and Agreement subsidiaries,
and IBFs........................................................ 1,544,664
Noninterest-bearing $ 6,571
Interest-bearing 1,538,093
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBFs:
Federal funds purchased and
Securities sold under agreements to repurchase.................. 2,156,756
Demand notes issued to U.S. Treasury............................... 799,995
Trading Liabilities................................................ 155,047
Other borrowed money
With original maturity of one year or less........................ 10,085,030
With original maturity of more than one year through three years.. 882,274
With original maturity of more than one year...................... 1,169,398
Bank's liability on acceptances executed and outstanding........... 50,248
Subordinated notes and debentures.................................. 645,953
Other liabilities.................................................. 1,080,158
-----------
Total liabilities.................................................. 52,767,216
<CAPTION>
EQUITY CAPITAL
<S> <C>
Perpetual preferred stock and related surplus..................... 0
Common Stock...................................................... 218,919
Surplus........................................................... 1,933,735
Undivided profits and capital reserves............................ 2,760,127
Net unrealized holding gains (losses) on
available-for-sale securities.................................... (31,038)
Cumulative foreign currency translation adjustments............... 0
Total equity capital.............................................. 4,881,743
-----------
Total liabilities and equity capital.............................. $57,648,959
===========
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
KOPPERS INDUSTRIES, INC.
OFFER TO EXCHANGE ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE NOT BEEN SO
REGISTERED.
PURSUANT TO THE PROSPECTUS, DATED JANUARY , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PNC BANK, NATIONAL ASSOCIATION, EXCHANGE AGENT
By Mail: By Hand or Overnight By Facsimile:
PNC BANK, Courier: PNC BANK,
NATIONAL ASSOCIATION PNC BANK, NATIONAL
One Oliver Plaza, 27th Floor NATIONAL ASSOCIATION ASSOCIATION
Pittsburgh, PA 15222-2602 One Oliver Plaza, 27th Floor Fax (412) 762-8226
Attention: Fred J. Deramo Pittsburgh, PA 15222-2602 Attention: Fred
Attention: Fred J. Deramo Deramo
Confirm by
Telephone:
(412) 762-3666
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 acknowledges that he or she has received and reviewed the
Prospectus, dated , 1998 (the "Prospectus"), of Koppers Industries, Inc.,
a Pennsylvania corporation (the "Company"), and this Letter of Transmittal
(the "Letter") which together constitute the Company's offer (the "Exchange
Offer") to exchange up to $175,000,000 aggregate principal amount of the
Company's 9 7/8% Senior Subordinated Notes Due 2007 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of the Company's issued and
outstanding 9 7/8% Senior Subordinated Notes Due 2007 (the "Old Notes"), which
have not been so registered.
For each Old Note accepted for exchange, the registered holder of such Old
Note (collectively with all other registered holders of Old Notes, the
"Holders") will receive a New Note having a principal amount equal to that of
the surrendered Old Note. 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 December 1, 1997. Old Notes accepted for exchange will
cease to accrue interest from and after the date of consummation of the
Exchange Offer. Accordingly, Holders 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.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Old Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the "Book-
Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's
Message (as defined herein) is not delivered. Holders of Old Notes whose
certificates are not immediately available, or who are unable to deliver their
certificates or confirmation of the book-entry tender of their Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-
Entry Confirmation") and all other documents required by this Letter to the
Exchange Agent on or prior to the Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Prospectus" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
THE UNDERSIGNED HAS COMPLETED THE APPROPRIATE BOXES BELOW AND SIGNED THIS
LETTER TO INDICATE THE ACTION THE UNDERSIGNED DESIRES TO TAKE WITH RESPECT TO
THE EXCHANGE OFFER.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Old Notes indicated below. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the
Company. The undersigned hereby further represents that any New Notes acquired
in exchange for Old Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is the undersigned, that neither the Holder of such Old Notes
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Notes and that neither the
Holder of such Old Notes nor any such other person is an "affiliate" (as
defined in Rule 405 under the Securities Act) of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred
by a Holder thereof (other than a Holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in the ordinary course of such
Holder's business and such Holder has no arrangement with any person to
participate in a distribution of such New Notes. However, the SEC has not
considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in other circumstances. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes
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 any person
to participate in, a distribution of the New Notes to be acquired pursuant to
the Exchange Offer, such Holder could not rely on the applicable
interpretations of the staff of the SEC and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it acknowledges that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes. However,
by so acknowledging and by delivering a prospectus, the undersigned will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the 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 undesigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" herein, please issue the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Old Notes, please credit
2
<PAGE>
the account indicated above maintained at the Book-Entry Transfer Facility.
Similarly, unless otherwise indicated under the box entitled "Special Delivery
Instructions" herein, please send the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) to the
undersigned at the address shown in the box herein entitled "Description of Old
Notes Delivered."
THE UNDERSIGNED, BY COMPLETING THE BOX BELOW ENTITLED "DESCRIPTION OF OLD
NOTES DELIVERED" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED
OLD NOTES AS SET FORTH IN SUCH BOX.
List below the Old Notes which this Letter relates. If the space provided
below is inadequate, the certificate numbers and the principal amount of Old
Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF OLD NOTES DELIVERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S)
AND
ADDRESS
OF AGGREGATE PRINCIPAL
REGISTERED CERTIFICATE PRINCIPAL AMOUNT
HOLDER NUMBER(S)* AMOUNT TENDERED**
- --------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
- --------------------------------------------
TOTALS:
- --------------------------------------------
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a Holder will be deemed to
have tendered ALL of the Old Notes represented by the listed
certificates. See Instruction 2. Old Notes tendered hereby must be in
denominations of a principal amount of $1,000 and any integral multiple
thereof. See Instruction 1.
[_]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: _____________________________________________
Holder's Account Number: ___________ Transaction Code Number: ______________
By crediting Old Notes to the Exchange Agent's Account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP
procedures with respect to the Exchange Offer, including transmitting an
Agent's Message to the Exchange Agent in which the Holder of Old Notes
acknowledges and agrees to be bound by the terms of this Letter, the
participant in ATOP confirms on behalf of itself and the beneficial owners of
such Old Notes all provisions of this Letter applicable to it and such
beneficial owners as if it had completed the information required herein and
executed and transmitted this Letter to the Exchange Agent.
- --------------------------------------------------------------------------------
3
<PAGE>
[_]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name of Registered Holder: _________________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution Which Guaranteed Delivery: _____________________________
If Delivered by Book-Entry Transfer, Complete the Following: _______________
Holder's Account Number: ___________ Transaction Code Number: _____________
- -------------------------------------------------------------------------------
[_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL COPIES
OF THE PROSPECTUS AND ANY AMENDMENTS OR SUPPLEMENTS THERETO. (UNLESS
OTHERWISE SPECIFIED, 10 ADDITIONAL COPIES WILL BE FURNISHED.)
Name: ______________________________________________________________________
Address: ___________________________________________________________________
4
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if
certificates for Old Notes not
exchanged and/or New Notes are to
be issued in the name of someone
other than the person or persons
whose signature(s) appear(s) on
this Letter below, or if Old Notes
delivered by book-entry transfer
which are not accepted for exchange
are to be returned by credit to an
account maintained at the Book-
Entry Transfer Facility other than
the Holder's account previously
indicated.
Issue New Notes and/or Old Notes to:
Name _______________________________
(Please Type or Print)
Address ____________________________
____________________________________
____________________________________
(ZIP CODE)
[_] Credit unexchanged Old Notes
delivered by book-entry transfer
to the Book-Entry Transfer
Facility account set forth below.
____________________________________
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if
certificates for Old Notes not
exchanged and/or New Notes are to
be sent to someone other than the
person or persons whose
signature(s) appear(s) on this
Letter below or to such person or
persons at an address other than
shown in the box entitled
"Description of Old Notes
Delivered" on this Letter above.
Mail New Notes and/or Old Notes to:
Name _______________________________
(Please Type or Print)
Address ____________________________
____________________________________
____________________________________
(ZIP CODE)
5
<PAGE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
HEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE
PLEASE SIGN HERE
(ALL TENDERING HOLDERS MUST COMPLETE THIS LETTER AND THE ACCOMPANYING
SUBSTITUTE FORM W-9)
X __________________________________ Date: ______________________________
X __________________________________ Date: ______________________________
Signature(s)
Area Code and Telephone Number: _________________________
If a Holder is tendering any Old Notes, this letter must be signed by the
Holder(s) as the name(s) appear(s) on the certificate(s) for the Old Notes
or by any person(s) authorized to become Holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, officer or other person acting in a fiduciary or
representative capacity, please set forth full title. See Instruction 3.
Name: _______________________________________________________________________
_____________________________________________________________________________
(Please Type or Print)
Capacity (full title): ______________________________________________________
Address: ____________________________________________________________________
Telephone: __________________________________________________________________
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3)
_____________________________________________________________________________
(Signature(s) Guaranteed by an Eligible Institution)
_____________________________________________________________________________
(Authorized Signature)
_____________________________________________________________________________
(Title)
_____________________________________________________________________________
(Name and Firm)
Date: ________________________, 1998
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER TO
EXCHANGE THE 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007 OF
KOPPERS INDUSTRIES, INC., WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT, FOR THE OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES
DUE 2007 OF KOPPERS INDUSTRIES, INC., WHICH HAVE NOT BEEN SO REGISTERED.
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
letter is to be completed by Holders of Old Notes either if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message
is not delivered. Certificates for all physically tendered Old Notes, or a
Book-Entry Confirmation, as the case may be, as well as a properly completed
and duly executed Letter (or manually signed facsimile hereof) and any other
documents required by this Letter, must be received by the Exchange Agent at
the address set forth herein on or prior to the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Old Notes tendered hereby must be in denominations of a principal
amount of $1,000 and any integral multiple thereof. The term "Agent's Message"
means a message, transmitted to the Book-Entry Transfer Facility and received
by the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that the Book-Entry Transfer Facility has received an express
acknowledgement from the tendering Participant that such Participant has
received and agrees to be bound by this Letter and that the Company may
enforce this Letter against such Participant.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old
Notes pursuant to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus.
Pursuant to such procedures, (i) such tender must be made through an Eligible
Institution, (ii) on or prior to 5:00 p.m., New York City time, on the
Expiration Date, the Exchange Agent must receive from such Eligible
Institution a properly completed and duly executed Letter (or a facsimile
thereof or Agent's Message in lieu thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by the Company (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 this
Letter 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 this Letter, are deposited by the Eligible
Institution within three NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering Holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be by registered mail, properly insured, with return receipt
requested, and made sufficiently in advance of the Expiration Date to permit
delivery to the Exchange Agent prior to 5:00 p.m. New York City time, on the
Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, the tendering Holder(s) should fill in the
aggregate principal amount of Old Notes to be tendered in the prior box
entitled "Description of Old Notes Delivered--Principal Amount Tendered." A
reissued certificate representing the balance of nontendered Old Notes will be
sent to such tendering Holder, unless otherwise provided in the appropriate
box of this Letter,
7
<PAGE>
promptly after the Expiration Date. All of the Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS, GUARANTEE OF
SIGNATURES. If this Letter is signed by the Holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter as there are different registrations of
certificates.
When this Letter is signed by the Holder or Holders of the Old Notes
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
Holder, then endorsements of any certificates transmitted hereby or separate
bond powers are required. Signatures on such certificate(s) must be guaranteed
by an Eligible Institution.
If this Letter is signed by a person other than the Holder or Holders of any
certificate(s) specified herein, such certificate(s) must be endorsed
accompanied by appropriate bond powers, in either case signed exactly as the
name or names of the Holder or Holders appear(s) on the certificate(s) and
signatures on such certificate(s) must be guaranteed by an Eligible
Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
ENDORSEMENTS ON CERTIFICATES FOR OLD NOTES OR SIGNATURES ON BOND POWERS
REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FINANCIAL INSTITUTION
(INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE HOUSES)
THAT IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM, THE
NEW YORK STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM OR THE STOCK EXCHANGES
MEDALLION PROGRAM (EACH, AN "ELIGIBLE INSTITUTION").
SIGNATURES ON THIS LETTER NEED NOT BE GUARANTEED BY AN ELIGIBLE INSTITUTION,
PROVIDED THE OLD NOTES ARE TENDERED: (I) BY A REGISTERED HOLDER OF OLD NOTES
(WHICH TERM, FOR PURPOSES OF THE EXCHANGE OFFER, INCLUDES ANY PARTICIPANT IN
THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE NAME APPEARS ON A SECURITY
POSITION LISTING AS THE HOLDER OF SUCH OLD NOTES) WHO HAS NOT COMPLETED THE
BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS" OR "SPECIAL DELIVERY
INSTRUCTIONS" ON THIS LETTER, OR (II) FOR THE ACCOUNT OF AN ELIGIBLE
INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders of Old
Notes should indicate in the applicable box the name and address to which New
Notes issued pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if different from
the name or address of the person signing this Letter. In the case of issuance
in a different name, the employer identification or social security number of
the person named must also be indicated. Holders tendering Old Notes by book-
entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such Holder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter.
8
<PAGE>
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If, however, New Notes and/or substitute Old Notes not
exchanged are to be delivered to, or are to be registered or issued in the
name of, any person other than the Holder of the Old Notes tendered hereby, or
if tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the 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 herewith, the amount of such transfer taxes will be billed to such
tendering Holder and the Exchange Agent will retain possession of an amount of
New Notes with a face amount equal to the amount of such transfer taxes due by
such tendering Holder pending receipt by the Exchange Agent of the amount of
such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering Holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Although the Company intends to notify Holders of defects or irregularities
with respect to tenders of Old Notes, neither the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give any such
notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
9. WITHDRAWAL OF TENDERS. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth above prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
be signed by the Holder in the same manner as the original signature on this
Letter (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the trustee under the Indenture
register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions
as to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes that 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 as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following the procedures described above at any time on or prior
to 5:00 p.m., New York City time, on the Expiration Date.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus, this Letter and other related documents may be directed to the
Exchange Agent, at (412) 762-3666.
9
<PAGE>
11. INCORPORATION OF LETTER OF TRANSMITTAL. This Letter shall be deemed to
be incorporated in and acknowledged and accepted by any tender through the
Book-Entry Transfer Facility's ATOP procedures by any Participant on behalf of
itself and the beneficial owners of any Old Notes so tendered.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of New Notes is required to
provide the Company (as payor) with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 or otherwise establish a
basis for exemption from backup withholding to prevent backup withholding on
any New Notes delivered pursuant to the Exchange Offer and any payments
received in respect of the New Notes. If a holder of New Notes is an
individual, the TIN is such holder's social security number. If the Company is
not provided with the correct taxpayer identification number, a holder of New
Notes may be subject to a $50 penalty imposed by the Internal Revenue Service.
Accordingly, each prospective holder of New Notes to be issued pursuant to
Special Issuance Instructions should complete the attached Substitute Form W-
9. The Substitute Form W-9 need not be completed if the box entitled "Special
Issuance Instructions" has not been completed.
Certain holders of New Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt prospective holders of New Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Company, through the
Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalty of perjury,
attesting to the holder's exempt status. See the Enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of New Notes 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 any New Notes delivered pursuant to the
Exchange Offer and any payments received in respect of the New Notes, each
prospective holder of New Notes to be issued pursuant to Special Issuance
Instructions should provide the Company, through the Exchange Agent, with
either: (i) such prospective holder's correct TIN by completing the form
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such prospective holder is awaiting a TIN) and that (A) such prospective
holder has not been notified by the Internal Revenue Service that he or she is
subject to backup withholding as a result of a failure to report all interest
or dividends or (B) the Internal Revenue Service has notified such prospective
holder that he or she is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The prospective holder of New Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the New Notes. If the New Notes will be held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance regarding which number to report.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE IMPORTANT TAX INFORMATION)
PAYOR'S NAME: PNC BANK, NATIONAL ASSOCIATION
PART I--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT OR
INDICATE THAT YOU APPLIED FOR
A TIN AND CERTIFY BY SIGNING
AND DATING BELOW.
SUBSTITUTE
FORM W-9 TIN:--------------
DEPARTMENT Social Security
OF THE TREASURY Number or
INTERNAL Employer
REVENUE SERVICE Identification
Number
PAYOR'S REQUEST TIN Applied
FOR TAXPAYER for [_]
IDENTIFICATION NUMBER
("TIN") AND CERTIFICATION
PART II--CERTIFICATION--UNDER PENALTIES OF
PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am
waiting for a number to be issued to me);
-----------------------------------------------------
(2) I am not subject to backup withholding either
because: (a) I am exempt from backup
withholding, or (b) I have not been notified
by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a
result of a failure to report all interest or
dividends, or (c) the IRS has notified me that
I am no longer subject to backup withholding;
and
(3) any other information provided on this form is
true and correct.
-----------------------------------------------------
You must cross out item (2) of the above
certification if you have been notified by the IRS
that you are subject to backup withholding because
of underreporting of interest or dividends on your
tax return and you have not been notified by the
IRS that you are no longer subject to backup
withholding.
Signature: ________________ Date: ________________
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
NOTE: FAILURE BY A PROSPECTIVE HOLDER OF NEW NOTES TO BE ISSUED PURSUANT TO
THE SPECIAL ISSUANCE INSTRUCTIONS ABOVE TO COMPLETE AND RETURN THIS FORM
MAY RESULT IN BACKUP WITHHOLDING OF 31% OF THE NEW NOTES DELIVERED TO
YOU PURSUANT TO THE EXCHANGE OFFER AND ANY PAYMENTS RECEIVED BY YOU IN
RESPECT OF THE NEW NOTES. 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 II
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 (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by
the time of the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide a number.
------------------------------------- -----------------------------------
Signature Date
11
<PAGE>
NOTICE OF GUARANTEED DELIVERY
KOPPERS INDUSTRIES, INC.
OFFER TO EXCHANGE ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ITS 9 7/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE NOT BEEN SO
REGISTERED.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
As set forth in the Prospectus dated , 1998 (the "Prospectus") under
the caption "The Exchange Offer--Guaranteed Delivery" and the accompanying
Letter of Transmittal (the "Letter of Transmittal") and Instruction 1 thereto,
this form, or one substantially equivalent hereto, must be used to accept the
Exchange Offer if certificates representing the 9 7/8% Senior Subordinated
Notes due 2007 (the "Old Notes") of Koppers Industries, Inc., a Pennsylvania
corporation (the "Company"), are not immediately available or if the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit a Holder's certificates or other required documents to reach the
Exchange Agent on or prior to the Expiration Date. Such form may be delivered
by hand or transmitted by telegram, telex, facsimile transmission or mail to
the Exchange Agent and must include a guarantee by an Eligible Institution
unless such form is submitted on behalf of an Eligible Institution.
Capitalized terms used and not defined herein have the respective meanings
ascribed to them in the Prospectus.
The Exchange Agent is
PNC BANK, NATIONAL ASSOCIATION
By Mail: By Hand or Overnight Courier:
PNC Bank, National Association PNC Bank, National Association
One Oliver Plaza One Oliver Plaza
27th Floor 27th Floor
Pittsburgh, Pennsylvania 15222-2602 Pittsburgh, Pennsylvania 15222-2602
Attention: Fred J. Deramo Attention: Fred J. Deramo
Facsimile Transmission Number: Confirm by Telephone:
(412) 762-8226 (412) 762-3666
Attention: Fred Deramo
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OR TRANSMISSION VIA A FACSIMILE
NUMBER OTHER THAN THE ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
1
<PAGE>
Ladies & Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus and
accompanying Letter of Transmittal, receipt of which is hereby acknowledged,
the undersigned hereby tenders to Koppers Industries, Inc., a Pennsylvania
corporation (the "Company"), $ principal amount of Old Notes, pursuant
to the guaranteed delivery procedures set forth in the Prospectus and
accompanying Letter or Transmittal.
CERTIFICATE NUMBERS OF OLD NOTES PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE) ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________ ____________________________________
____________________________________
If Old Notes will be tendered by book-entry transfer to The Depository Trust
Company, provide account number:
Account No.
----------------------------
The undersigned authorizes the Exchange Agent to deliver this Notice of
Guaranteed Delivery to the Company and PNC Bank, National Association with
respect to the Old Notes tendered pursuant to the Exchange Offer.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
SIGN HERE
-----------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S) OR
AUTHORIZED SIGNATORY
-----------------------------------------------------------------------------
NAME(S) OF REGISTERED HOLDERS
(PLEASE TYPE OR PRINT)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
ADDRESS
-----------------------------------------------------------------------------
ZIP CODE
-----------------------------------------------------------------------------
AREA CODE AND TELEPHONE NUMBER
Dated:
-------------------------------------------------------------------- ,1998
2
<PAGE>
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States,
hereby (a) represents that the above-named person(s) has a net long position
in the Old Notes tendered hereby within the meaning of Rule 14e-4 under the
Securities Exchange Act of 1934, as amended, (b) represents that such tender
of Old Notes complies with Rule 14e-4 and (c) guarantees delivery to the
Exchange Agent of certificates representing the Old Notes tendered hereby,
in proper form for transfer, or confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at a Book-Entry Transfer
Facility (as defined in the Prospectus), in each case together with a
properly completed and duly executed Letter of Transmittal with any required
signature guarantees and any other documents required by the Letter of
Transmittal, within three New York Stock Exchange trading days after the
date hereof.
------------------------------------ --------------------------------------
Name of Firm Title
------------------------------------ --------------------------------------
Authorized Signature Name (Please Type or Print)
------------------------------------ Dated:
-----------------------------
, 1998
Address
------------------------------------
Area Code and Telephone Number
NOTE: DO NOT SEND CERTIFICATES REPRESENTING OLD NOTES WITH THIS FORM.
CERTIFICATES FOR OLD NOTES MUST BE SENT WITH YOUR LETTER OF TRANSMITTAL.
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