<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
KAYNAR TECHNOLOGIES INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3452 33-0591091
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
800 S. STATE COLLEGE BLVD.
FULLERTON, CALIFORNIA 92831
(714) 871-1550
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
MR. DAVID A. WERNER
EXECUTIVE VICE PRESIDENT
KAYNAR TECHNOLOGIES INC.
800 S. STATE COLLEGE BLVD.
FULLERTON, CALIFORNIA 92831
(714) 871-1550
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
C. JAMES LEVIN, ESQ. JOHN R. LIGHT, ESQ.
O'MELVENY & MYERS LLP LATHAM & WATKINS
400 SOUTH HOPE STREET 633 WEST FIFTH STREET
LOS ANGELES, CALIFORNIA 90071-2899 LOS ANGELES, CALIFORNIA 90071-2007
(213) 669-6000 (213) 485-1234
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- --------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- --------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE(1)
<S> <C> <C>
Common Stock, $.01 par value.......................................... $36,800,000 $11,152
</TABLE>
(1) Calculated pursuant to Rule 457(o).
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
------------------------
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 SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1997
PROSPECTUS
2,000,000 SHARES
[KTI LOGO]
KAYNAR TECHNOLOGIES INC.
COMMON STOCK
---------------------
Of the 2,000,000 shares of Common Stock offered hereby (the "Offering"),
1,800,000 shares are being sold by Kaynar Technologies Inc. (together with its
consolidated subsidiaries, the "Company") and 200,000 shares are being sold by
the Selling Stockholder (as defined herein). See "Principal Stockholders and
Selling Stockholder." The Company will not receive any proceeds from the sale of
shares by the Selling Stockholder.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
of the Common Stock will be between $14.00 and $16.00 per share. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price. The Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol "KTIC," subject to
official notice of issuance.
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-------------------
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.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholder
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Total(3)........................... $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 300,000 shares of Common Stock on the same terms as set forth
above, solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Stockholder will be $ ,
$ , $ and $ , respectively. See "Underwriting."
---------------------
The shares of Common Stock offered by this Prospectus are offered severally
by the Underwriters subject to prior sale, to withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the shares of Common Stock will be made at the offices of Lehman Brothers Inc.,
New York, New York on or about , 1997.
---------------------
LEHMAN BROTHERS PAINEWEBBER INCORPORATED
, 1997
<PAGE>
[IMAGE MATERIAL: PICTURES OF VARIOUS END-PRODUCTS USING THE COMPANY'S PRODUCTS:
BOEING 747;
BOEING 777; AIRCRAFT JET TURBINE ENGINE; AIRBUS A340; FRENCH HIGH-SPEED TGV
RAILWAY
LOCOMOTIVE; LOCKHEED F-117 STEALTH FIGHTER; M-1 ABRAMS MAIN BATTLE TANK.]
[IMAGE MATERIAL: PICTURES OF VARIOUS AIRCRAFT AND AUTOMOBILE ASSEMBLY
FACILITIES; PICTURES OF VARIOUS
PRODUCTS OF THE COMPANY'S KAYNAR, K-FAST, MICRODOT, AND RECOIL BUSINESS UNITS.]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, AND NOTES THERETO, APPEARING ELSEWHERE IN
THE PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THE PROSPECTUS
(I) ASSUMES THAT IMMEDIATELY PRIOR TO THE OFFERING, KAYNAR TECHNOLOGIES INC.
(THE "OPERATING COMPANY") WILL BE MERGED WITH AND INTO ITS PARENT, KAYNAR
HOLDINGS INC. (SOMETIMES REFERRED TO HEREIN AS "HOLDINGS"), WHICH, AS THE
CORPORATION SURVIVING THE MERGER, WILL BE RENAMED KAYNAR TECHNOLOGIES INC. (SEE
"THE REORGANIZATION" FOR MORE INFORMATION REGARDING THE MERGER), (II) REFLECTS
THE CONVERSION OF ALL OUTSTANDING SHARES OF HOLDINGS' CAPITAL STOCK INTO
ADDITIONAL SHARES OF COMMON STOCK OR SHARES OF SERIES C PREFERRED STOCK AS
DESCRIBED IN "THE REORGANIZATION" AND (III) ASSUMES THAT THE UNDERWRITERS'
OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. UNLESS OTHERWISE INDICATED, THE
TERM "COMPANY" AS USED HEREIN SHALL MEAN HOLDINGS, AS THE CORPORATION SURVIVING
THE MERGER, TOGETHER WITH EACH OF HOLDINGS' CONSOLIDATED SUBSIDIARIES.
THE COMPANY
The Company is a leading manufacturer of specialty fasteners, fastening
systems and related components primarily used by original equipment
manufacturers ("OEMs") and their subcontractors in the production of commercial
aircraft and defense products. In addition, the Company also manufactures other
specialty fasteners and related products for sale in the automotive, electronic
and other industrial markets, and their associated after-markets. The Company
designs and manufactures a substantial majority of its fasteners to its
customers' specifications and in a wide range of specialty metals, alloys and
composites.
The Company supplies products to virtually all major airframe and aircraft
engine OEMs, including Boeing Co. ("Boeing"), General Electric Company ("GE"),
the Pratt & Whitney Aircraft business of United Technologies Corporation ("Pratt
& Whitney"), Airbus Industries ("Airbus"), Lockheed Martin Corporation
("Lockheed Martin"), McDonnell Douglas Corporation ("McDonnell Douglas") and
Rolls Royce PLC ("Rolls Royce"), as well as to a global network of distributors.
Since the beginning of the commercial aircraft industry's recovery in 1994, the
Company has experienced significant increases in sales and profitability. During
this period, the Company's net sales have increased nearly 80%, from $55.1
million in 1994 to $99.0 million in 1996, and its operating income has increased
approximately 160%, from $5.0 million in 1994 to $12.8 million in 1996. The
Company's backlog of orders deliverable within 12 months has also increased
during this period, from approximately $21 million as of January 3, 1994 to
approximately $60 million as of December 31, 1996.
The Company offers a broad line of fasteners, fastening systems and related
components. The Company's Kaynar and Microdot business units manufacture
precision, self-locking, internally threaded nuts and inserts and precision,
threaded studs. Kaynar and Microdot fasteners are engineered for a variety of
harsh, demanding environments and often require high tensile strength,
toughness, durability, corrosion resistance and resistance to metal fatigue and
creep. Kaynar's fasteners, which include wrenchable nuts, anchor nuts, gang
channels, shank nuts, barrel nuts, clinch nuts and stake nuts, are used in
airframe construction to fasten together various aircraft components, including
the fuselage, wings and horizontal and vertical stabilizers. These fasteners
also serve a similar function in the construction of aircraft jet and turboprop
engines and related components. Recoil, acquired by the Company in August 1996,
manufactures helically-wound wire thread inserts and thread repair kits, which
are similar in design to certain Microdot products, but are sold to the
automotive, electronic and other industrial markets, and their associated
after-markets. The Company's K-Fast business unit produces and markets tools
that are leased or sold to OEMs and are designed to allow operators to install
the Company's and other manufacturers' fasteners rapidly and in restricted and
hard-to-reach areas, while still maintaining precision torque control.
The Company's goal is to sustain long-term, profitable growth by (i)
enhancing its position as a leading supplier of specialty fasteners to the
commercial aircraft and defense industries, (ii) expanding the array of fastener
products and services it offers to current customers, (iii) continuing to focus
on higher value-added specialty products, (iv) leveraging its core capabilities
in engineering, materials technology,
3
<PAGE>
manufacturing and business processes to develop additional business with both
new and existing customers, (v) increasing its international marketing and
penetration of foreign markets and (vi) pursuing selected opportunities for
acquisitions and strategic alliances.
The Company believes that it possesses a number of competitive strengths.
First, the Company has established itself as a market leader in the engineering
and manufacture of precision, self-locking internally threaded nuts and inserts
and precision, threaded studs used in the commercial aircraft and defense
industries. Products made by the Company have been "designed into" nearly all
major airframes and aircraft engines manufactured in the U.S. and Europe.
Second, cross-functional design and engineering teams and manufacturing
expertise allow the Company to respond rapidly to customer requirements. Third,
while many OEMs have significantly reduced the number of qualified suppliers of
a particular part to a core group of only two or three, the Company continues to
be a qualified supplier to virtually all major airframe and aircraft engine
OEMs. Fourth, the Company is a "source delegation supplier" to many of its
customers, including Boeing, GE and Pratt & Whitney. A source delegation
supplier's products are designed, shipped and installed without the OEM
undertaking further testing that it might otherwise perform before installation.
Fifth, the Company has benefited from ongoing programs designed to improve
operating efficiency and customer service, while maintaining or improving
quality control.
INDUSTRY OVERVIEW AND TRENDS. The Company's primary market for fasteners,
the commercial aircraft industry, is experiencing a strong increase in demand
from airlines ordering new and replacement aircraft. During the early 1990's,
most airlines significantly decreased their aircraft purchase orders due to
reduced profitability and excess capacity. Since that time, however, a
rebounding world economy and increased passenger air traffic have returned many
airlines to profitability, resulting in renewed demand for new and replacement
aircraft. In 1996, for example, Boeing and Airbus, the two largest commercial
aircraft manufacturers, reported increases in announced aircraft orders of 107%
and 208% over 1995, respectively. Increased demand for new and replacement
aircraft has led to an increase in the demand for fasteners and fastening
systems, such as those manufactured by the Company.
While there can be no assurance that demand for new and replacement aircraft
will not be adversely affected by business cycle fluctuations or declines in
airline profitability, the Company believes that long-term industry trends are
favorable. For example, in its 1996 Current Market Outlook report, Boeing
projects that during the period from 1995 to 2005, world air travel will grow by
approximately 70%. Boeing also projects that during this period domestic and
international airlines will lease or purchase approximately 7,000 new aircraft,
thereby increasing the worldwide commercial fleet from approximately 11,000
aircraft at the end of 1995 to approximately 16,000 aircraft (net of
retirements) at the end of 2005. In addition, as airlines seek to serve a
growing number of air travelers with existing restrictions on arrival and
departure slots, airport gates and ramp capacity, commercial aircraft OEMs are
experiencing increased orders for heavier, widebodied aircraft of intermediate
size. Widebodied aircraft generally require a greater number of fasteners than
smaller aircraft.
RECENT ACQUISITIONS. The Company acquired one business and one additional
product line in 1996. In August 1996, the Company purchased the businesses of
Recoil Pty Ltd, an Australian corporation (the acquired businesses are
collectively referred to herein as "Recoil"). For a description of the Recoil
business unit see "Business--Products and Services--Industrial Products and
Services." In the period from the Company's purchase of Recoil to December 31,
1996, and for the twelve months ended on that date, Recoil's net sales were $3.9
million and $9.9 million, respectively. In February 1996, the Company purchased
the KELOX product line from the Fastening Systems division of Emhart Fastening
Teknologies. The KELOX product line complements various Microdot inserts.
COMPANY ORGANIZATION. The Company was formed in 1993 for the purpose of
acquiring substantially all of the assets of the Aerospace Fastening Systems
Group ("AFSG") of Microdot Inc., a Delaware corporation that commenced a
voluntary bankruptcy proceeding on June 10, 1993 ("Old Microdot"). The
acquisition was structured as a management buyout financed substantially by the
General Electric Capital Corporation ("GECC" or the "Selling Stockholder"). See
"The Company" for additional information regarding the AFSG acquisition.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company...... 1,800,000 shares
Common Stock offered by the Selling
Stockholder............................ 200,000 shares
Total Common Stock offered........... 2,000,000 shares
Common Stock and Common Stock equivalents
to be outstanding after the
Offering(1)............................ 8,600,000 shares
Use of proceeds.......................... Proceeds to the Company will be used to repay
certain indebtedness and for working capital and
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol... KTIC
</TABLE>
- ------------------------
(1) Includes 5,206,000 shares of Series C Convertible Preferred Stock (the
"Series C Preferred Stock") owned by the Selling Stockholder. The Series C
Preferred Stock is convertible into shares of Common Stock at a one-to-one
conversion rate, subject to adjustment in certain circumstances. See
"Description of Capital Stock--Series C Preferred Stock."
RISK FACTORS
Prior to making an investment in the Common Stock offered hereby,
prospective purchasers of the Common Stock should take into account the specific
considerations set forth in "Risk Factors" as well as other information set
forth in the Prospectus.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The summary consolidated financial and operating information set forth below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto, and other financial information included elsewhere
in the Prospectus. The Company was incorporated in October 1993 and began
operations on January 3, 1994 when it acquired substantially all of the assets
of AFSG. See "The Company--The Predecessor Company." The summary consolidated
financial and operating information for the years ended December 31, 1994, 1995
and 1996 is derived from the Consolidated Financial Statements of the Company
that have been audited by Arthur Andersen LLP, independent public accountants.
The summary consolidated financial and operating information for the years ended
December 31, 1992 and 1993 is derived from the unaudited financial statements of
AFSG, the Company's predecessor, and, in the opinion of the Company's
management, reflects all adjustments necessary to present the financial results
of AFSG fairly and on a basis consistent with the Company's financial
statements. The information for AFSG is presented to "Operating income" because
the borrowing arrangements and tax position of Old Microdot are not meaningful
to the Company. The unaudited summary consolidated financial and operating
information for AFSG is provided for informational purposes only.
<TABLE>
<CAPTION>
AFSG COMPANY
-------------------- -------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996(1)
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
INCOME STATEMENT DATA:
Net sales....................................................... $ 52,510 $ 46,378 $ 55,117 $ 68,781 $ 99,023
Cost of sales................................................... 38,975 35,933 41,117 51,940 72,924
--------- --------- --------- --------- ---------
Gross profit.................................................. 13,535 10,445 14,000 16,841 26,099
Selling, general and administrative expenses(2)................. 8,194 8,239 9,048 10,018 13,263
--------- --------- --------- --------- ---------
Operating income.............................................. 5,341 2,206 4,952 6,823 12,836
Interest expense, net........................................... 2,304 2,935 4,011
--------- --------- ---------
Income before income taxes.................................... 2,648 3,888 8,825
Provision for income taxes...................................... 1,129 1,577 3,530
--------- --------- ---------
Net income.................................................... $ 1,519 $ 2,311 $ 5,295
--------- --------- ---------
--------- --------- ---------
Earnings per share(3)........................................... $ 0.22 $ 0.34 $ 0.78
--------- --------- ---------
--------- --------- ---------
Weighted average number of shares outstanding(3)................ 6,800 6,800 6,800
--------- --------- ---------
--------- --------- ---------
PRO FORMA INCOME STATEMENT DATA(4):
Pro forma earnings per share, as adjusted....................... $ 0.76
---------
---------
Pro forma shares used in computing pro forma earnings per share,
as adjusted................................................... 8,600
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
AS
ACTUAL ADJUSTED(5)
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital......................................................................... $ 30,188 $ 41,779
Total assets............................................................................ 73,689 84,534
Total long-term debt, excluding capital leases.......................................... 46,633 33,789
Stockholders' equity.................................................................... 10,626 35,061
</TABLE>
- ------------------------
(1) The Company acquired one business and one additional product line in 1996.
In August 1996, the Company purchased its Recoil business unit for
approximately $12.2 million and the assumption of
6
<PAGE>
certain liabilities. See "Business--Products and Services--Industrial
Products and Services." The Recoil acquisition has been accounted for under
the purchase method of accounting and, accordingly, the operating results of
Recoil have been included in the Company's results of operations since mid-
August 1996. In February 1996, the Company purchased the KELOX product line
from the Fastening Systems division of Emhart Fastening Teknologies for
$441,000 in cash.
(2) Selling, general and administrative expenses of AFSG represent direct
expenses and do not include an allocation of corporate overhead or expenses
related to certain functions performed on a corporate-wide basis by Old
Microdot, such as risk management services, tax reporting and similar
corporate administrative functions.
(3) Earnings per share are computed based on the weighted average number of
shares of Common Stock and Common Stock equivalents outstanding. The
outstanding shares of Series C Preferred Stock are included as Common Stock
equivalents on an "as-if-converted" basis. See "Description of Capital
Stock--Series C Preferred Stock."
(4) Pro forma income statement data reflect the historical results for the year
ended December 31, 1996, adjusted to reflect (i) the sale of 1,800,000
shares of Common Stock offered by the Company hereby at an estimated initial
public offering price of $15.00 per share (the midpoint of the estimated
filing range) and (ii) the application of approximately $18 million of the
net proceeds to the reduction of certain indebtedness of the Company as if
such debt reduction occurred at January 1, 1996. The pro forma results also
reflect interest income on the balance of the Company's net proceeds from
the Offering, assuming such proceeds were invested at January 1, 1996.
(5) As adjusted to reflect (i) the sale of 1,800,000 shares of Common Stock
offered by the Company hereby at an estimated initial public offering price
of $15.00 per share and (ii) the application of approximately $13.6 million
of the net proceeds to the reduction of certain indebtedness of the Company
as if such debt reduction occurred at December 31, 1996. The Company
anticipates that as of the date of the Offering, it will have increased its
borrowings under its revolving line-of-credit to approximately $4.9 million.
Accordingly, the total amount of the net proceeds that will be applied to
the reduction of certain indebtedness of the Company will approximate $18
million. See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SPECIFIC FACTORS SET
FORTH BELOW AS WELL AS THE OTHER INFORMATION INCLUDED ELSEWHERE IN THE
PROSPECTUS BEFORE PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY. CERTAIN
STATEMENTS IN THE PROSPECTUS ARE FORWARD-LOOKING IN NATURE AND, ACCORDINGLY,
WHETHER THEY PROVE TO BE ACCURATE IS SUBJECT TO MANY RISKS AND UNCERTAINTIES.
THE ACTUAL RESULTS THAT THE COMPANY ACHIEVES MAY DIFFER MATERIALLY FROM ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THE PROSPECTUS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES, INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW AND THOSE CONTAINED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THE PROSPECTUS.
COMMERCIAL AIRCRAFT INDUSTRY CYCLICALITY
The primary market for the Company's products is the commercial aircraft
industry. Historically, demand from this industry has been subject to cyclical
fluctuations, with orders from original equipment manufacturers ("OEMs") and
other customers for the Company's products typically increasing or decreasing in
advance of corresponding changes in the deliveries of new aircraft. The demand
for new aircraft historically has been closely related to the financial
performance of the airlines, which in turn has been closely related to general
economic conditions and changes in business cycles. In the early 1990s,
decreases in air passenger traffic, coupled with deliveries of previously
purchased aircraft, created excess capacity for the airlines. Accordingly,
airlines and aircraft leasing companies deferred or cancelled their purchases of
new aircraft. These deferrals and cancellations adversely affected the volume
and price of orders placed for products used to manufacture commercial aircraft
and aircraft engine components, including the fasteners and fastening systems
manufactured by the Company. Although (i) the U.S. airline industry reported
profits in 1994, 1995 and 1996, (ii) excess capacity has been reduced and (iii)
orders for new aircraft to be produced by major aircraft manufacturers have
increased, there can be no assurance that this improved operating performance
will continue or that deliveries of commercial aircraft will not decline in the
future. Changes in the commercial aircraft market resulting in a reduction in
the rate of future aircraft deliveries, including cancellations or deferrals of
scheduled deliveries, could have a material adverse effect on the Company.
CUSTOMER CONCENTRATION AND INDUSTRY CONSOLIDATION
A significant portion of the Company's business is dependent upon a limited
number of large manufacturers of commercial aircraft and defense products.
Direct sales to Boeing Co. ("Boeing"), General Electric Company ("GE") and the
Pratt & Whitney Aircraft business of United Technologies Corporation ("Pratt &
Whitney"), for example, accounted for approximately 18%, 12% and 8% of the
Company's 1996 net sales, respectively. In addition, the Company believes that a
significant portion of the products that it sells to independent distributors
and other customers is ultimately resold to these three OEMs, as well as other
major commercial aircraft and defense product manufacturers. The commercial
aircraft and defense industries are also currently undergoing a process of
consolidation, as evidenced most recently by the pending merger of Boeing and
McDonnell Douglas Corporation ("McDonnell Douglas"). Such continuing
consolidation may lead to further concentration in the number of airframe and
aircraft engine OEMs that purchase the Company's products. The loss of one or
more significant customers would have a material adverse effect on the Company.
In addition, because of the relatively small number of customers for certain of
the Company's products, such customers may be able to influence the Company's
prices and other terms of sale.
LOSS OF QUALIFIED SUPPLIER STATUS
The Company works directly with its customers to design and manufacture
products based on the customers' own specifications. See "Business--Engineering
and Product Development." Once a fastener has been "designed into" a particular
airframe or engine component, the OEM will generally designate the Company as a
qualified supplier and rely on the Company to provide the fastener for the
entire production cycle of the airframe or engine, which could last a decade or
more. From time to time, other suppliers of
8
<PAGE>
fasteners to the aerospace industry have lost their qualified supplier status
with one or more OEMs by reason of, among other things, problems with product
quality, manufacturing processes or documentation. Although the Company has no
reason to believe that it will lose its qualified supplier status with respect
to any product or customer, there can be no assurance that such an event will
not occur. If a significant customer were to terminate the Company's qualified
supplier status with respect to one or more parts, it could have a material
adverse effect on the Company.
CONCENTRATION OF STOCK OWNERSHIP
Upon completion of the Offering, General Electric Capital Corporation
(together with its affiliates, "GECC" or the "Selling Stockholder") will
beneficially own 5,206,000 shares of the Company's Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"),
which will constitute all issued and outstanding Series C Preferred Stock at
that time. As long as the outstanding Series C Preferred Stock represents 25% or
more of the Company's Fully Diluted Shares (as defined below), the Series C
Preferred Stock is entitled to vote as a separate class on certain matters
affecting the Company, including, among other things, (i) the creation of any
other class or series of preferred stock, (ii) any issuance of authorized shares
of any class of capital stock, (iii) any merger or consolidation resulting in
shares of Common Stock or Series C Preferred Stock being converted into other
securities or the right to receive cash or other property and (iv) any
amendments to the Company's Amended and Restated By-laws (the "By-laws"). See
"Description of Capital Stock--Series C Preferred Stock." "Fully Diluted Shares"
means, at any given time, the sum of (i) the outstanding Common Stock and (ii)
the shares of Common Stock issuable upon conversion or exercise of all
outstanding convertible securities, options and warrants convertible into, or
exercisable for, Common Stock at that time or within sixty days thereafter. In
addition, as long as the outstanding Series C Preferred Stock represents 40% or
more of the Fully Diluted Shares, the holder thereof will have the right,
pursuant to a Stockholders Agreement, dated March , 1997, among the Company
and its existing stockholders (the "New Stockholders Agreement"), to designate
two individuals that the Company will nominate for election to the Board of
Directors each year. As long as the Series C Preferred Stock represents 25% or
more (but less than 40%) of the Fully Diluted Shares, the holder thereof will
have the right to designate one individual that the Company will nominate for
election to the Board of Directors of each year.
The Selling Stockholder, in its sole discretion and at any time, may convert
each share of Series C Preferred Stock into one share of Common Stock, subject
to certain adjustments. In addition, upon any transfer of Series C Preferred
Stock by the Selling Stockholder to a non-affiliate, the Series C Preferred
Stock will automatically convert into Common Stock at a one-to-one conversion
ratio, subject to certain adjustments. If all of the Series C Preferred Stock
currently outstanding were converted into Common Stock, the Selling Stockholder
would beneficially own approximately 60.5% of the Common Stock upon consummation
of the Offering, assuming the Underwriters' over-allotment option is not
exercised, or approximately 58.5% assuming full exercise of the Underwriters'
over-allotment option.
As a result of (i) the special voting rights granted to the Series C
Preferred Stock, (ii) the rights granted to the Selling Stockholder under the
New Stockholders Agreement and (iii) the possibility that the Selling
Stockholder could convert its Series C Preferred Stock into Common Stock at any
time, the Selling Stockholder may be able to exercise substantial influence over
many matters affecting the Company, including the composition of the Board of
Directors and approval of significant corporate transactions. This concentration
of ownership may also have the effect of either causing or delaying or
preventing a change in control of the Company. See "Description of Capital
Stock--Certain Anti-Takeover Effects."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant degree on the efforts of
the Company's senior management. The Company's operations may be adversely
affected if one or more members of senior management ceases to be active in the
Company. The Company currently has employment agreements with Jordan A. Law,
Chief Executive Officer; David A. Werner, Executive Vice President; Robert L.
Beers, Senior Vice President, Marketing and Business Development; LeRoy A. Dack,
Division President, Kaynar;
9
<PAGE>
Joseph M. Varholick, Division President, Microdot; Kenneth D. Jones, Group Chief
Executive Officer, Recoil; and Imre Berecz, Vice President, Product Research and
Development, and Managing Director, K.T.I. Femipari KFT. See
"Management--Employment Contracts and Termination of Employment and
Change-In-Control Arrangements."
AVAILABILITY AND COST OF RAW MATERIALS
Commercial deposits of certain metals, such as titanium and nickel, that are
required for the manufacture of several of the Company's products are only found
in certain parts of the world. The availability and prices of these metals may
be influenced by private or governmental cartels, changes in world politics,
unstable governments in exporting nations or inflation. Similarly, supplies of
steel and other, less exotic metals used by the Company may also be subject to
variation in availability and pricing. Shortages of, and price increases for,
certain raw materials used by the Company have occurred in the past and may
occur in the future. Although to date the Company has been able to obtain such
supplies of all necessary raw materials, there can be no assurance that the
Company will always be able to obtain adequate supplies at reasonable prices.
Future shortages or price fluctuations in raw materials could have a material
adverse effect on the Company. If, for example, demand for titanium products in
other industries continues to increase, it is possible that supplies of titanium
could become limited or that prices could increase substantially, or both. As a
result, the Company's material costs could rise accordingly. If the Company is
unable to recover its increased costs through product price increases, it could
have a material adverse effect on the Company. See "Business--Manufacturing and
Raw Materials."
COMPETITION
Numerous companies manufacture fasteners, fastening systems and related
components that compete with the Company's products. Certain of these
competitors have greater financial resources than the Company. There can be no
assurance that competitive pressures in any of the markets to which the Company
supplies products will not have a material adverse effect on the Company. See
"Business-- Competition."
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
The Company's facilities and manufacturing processes are engaged in
activities regulated by extensive federal, state and local environmental and
worker safety and health laws and regulations, including those relating to air
emissions, wastewater discharges, the handling and disposal of solid and
hazardous wastes and the remediation of contamination caused by the release of
hazardous substances. The Company uses significant quantities of substances that
are considered hazardous or toxic under such laws and regulations. The Company's
operations thus pose a risk of accidental releases of, and worker exposure to,
hazardous or toxic substances.
The Company also faces risks that governmental environmental requirements
may become more stringent in the future and that the Company may be subject to
legal proceedings brought by private parties or governmental agencies with
respect to environmental matters. For example, the degreasing operations at the
Company's manufacturing facilities currently use perchloroethylene, a toxic
solvent that has been subject to increasing regulation. Although the Company
believes that it is in material compliance with all applicable environmental
laws and regulations, including those relating to perchloroethylene, there can
be no assurance that the Company will remain in compliance or that the failure
to comply with such laws and regulations will not result in liabilities that are
material to the Company.
The Company is currently seeking to have a maximum usage restriction removed
from an environmental permit for its cadmium-plating line. The Company was
previously granted a variance to exceed this restriction. There can be no
assurance, however, that this restriction will be removed or that another
variance from the restriction will be granted. If the restriction is not removed
and another variance is not granted, it could have a material adverse effect on
the Company. See "Business--Environmental Matters."
10
<PAGE>
BENEFITS TO SELLING STOCKHOLDER
The existing stockholders of the Company will receive certain benefits from
the sale of the Common Stock offered hereby. The Offering will establish a
public market for the Common Stock and provide increased liquidity to the
existing stockholders for the shares of Common Stock and Series C Preferred
Stock (which is convertible into Common Stock) that they will own after the
Offering, subject to certain limitations. See "Shares Eligible For Future Sale."
The Company intends to use approximately $18 million of the net proceeds from
the Offering to repay certain indebtedness owed to the Selling Stockholder. See
"Use of Proceeds." The Selling Stockholder will sell 200,000 shares of Common
Stock in the Offering and will receive $2.8 million in net proceeds, based upon
an initial public offering price of $15.00 per share, after deducting the
Selling Stockholder's proportionate share of the estimated underwriting
discounts and commissions.
REDUCED GOVERNMENT PURCHASES; GOVERNMENT REGULATION
The Company is a direct supplier and subcontractor to several manufacturers
of airframes and engines used by the defense industry. Direct sales to the U.S.
government constituted approximately 6% of the Company's 1996 net sales. Many of
the Company's other customers are also government contractors and subcontractors
who may use the Company's fasteners for military applications. As a result,
future reductions in defense budgets or military aircraft procurement could
adversely affect the Company. See "Business--Industry Overview and
Trends--Defense Market." In particular, the government could seek to terminate
any of its contracts with the Company or with any of the airframe and engine
manufacturers to which the Company supplies fasteners.
In addition, as a supplier and subcontractor to the U.S. government, the
Company is directly and indirectly subject to various federal rules, regulations
and orders applicable to government contracts. Although the Company believes
that is in material compliance with all such laws, any future violation could
result in civil liability, cancellation or suspension of existing contracts or
ineligibility for future contracts or subcontracts funded in whole or in part
with federal funds. A reduction in governmental purchases of the Company's
products, or a violation by the Company of any laws applicable to government
contracts, could have a material adverse effect on the Company.
PRODUCT LIABILITY; CLAIMS EXPOSURE
The Company's products may expose it to liabilities resulting from the
failure of an airframe or aircraft engine manufactured with fasteners supplied
by the Company. While the Company maintains liability insurance to protect it
from such liabilities, and while no material claims have ever been made against
the Company, no assurance can be given that claims will not arise in the future
or that such insurance coverage will be adequate. Additionally, there can be no
assurance that insurance coverage can be maintained in the future at an
acceptable cost. Any such liability not covered by insurance, or for which third
party indemnification is not available, could have a material adverse effect on
the Company.
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE VOLATILITY OF
STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after the Offering. The initial public offering
price will be determined by negotiation between the Company and the
Representatives (as defined in "Underwriting") based upon several factors. The
market price of the Common Stock may be volatile and could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new products by the Company or its
competitors, changes in financial estimates by securities analysts, or other
events or factors beyond the Company's control, including events affecting the
commercial aircraft and defense industries generally. These broad market
fluctuations may adversely affect the market price of the Common Stock. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. Such litigation could result in substantial costs
11
<PAGE>
and a diversion of management's attention and resources, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
following the Offering could adversely affect the market price for the Common
Stock. The Company, its executive officers and directors and the Selling
Stockholder, who will beneficially own 6,600,000 shares of Common Stock in the
aggregate following the Offering (including 5,206,000 shares receivable upon
conversion of all outstanding Series C Preferred Stock), have agreed not to
offer, sell, contract to sell, or otherwise dispose of, any shares of Common
Stock or any other capital stock of the Company, for a period of 180 days, after
the date of the Prospectus without prior written consent of Lehman Brothers Inc.
Upon the expiration of this period, however, the 6,600,000 shares of Common
Stock (including 5,206,000 shares receivable upon conversion of all outstanding
Series C Preferred Stock) held by the current holders may be eligible for sale
in the public market, subject to compliance with the volume, holding period and
other applicable limitations of Rule 144 ("Rule 144") promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), or pursuant to a
registration statement meeting the requirements of the Securities Act. Also upon
the expiration of this period, the Selling Stockholder will have certain rights,
pursuant to the New Stockholders Agreement, to require the Company to register
the shares of Common Stock into which the Series C Preferred Stock may be
converted. See "Description of Capital Stock -- The New Stockholders Agreement."
In addition, the shares of Common Stock sold in the Offering will be freely
tradeable without restriction under the Securities Act, except for any shares
purchased by an "affiliate" of the Company (as that term is defined under the
rules and regulations of the Securities Act), which shares will be subject to
the resale limitations of Rule 144. See "Shares Eligible for Future Sale" and
"Description of Capital Stock."
DILUTION
Assuming an initial public offering price of $15.00 per share, investors
participating in the Offering will incur an immediate dilution of $11.83 per
share in the net tangible book value of the Common Stock, determined as of
December 31, 1996. See "Dilution."
12
<PAGE>
THE COMPANY
The Company is a leading manufacturer of specialty fasteners, fastening
systems and related components primarily used by OEMs and their subcontractors
in the production of commercial aircraft and defense products. In addition, the
Company also manufactures other specialty fasteners and related products for
sale in the automotive, electronic and other industrial markets, and their
associated after-markets. The Company supplies products to virtually all major
airframe and aircraft engine OEMs, including Boeing, GE, Pratt & Whitney, Airbus
Industries ("Airbus"), Lockheed Martin Corporation ("Lockheed Martin"),
McDonnell Douglas and Rolls Royce PLC ("Rolls Royce"), as well as to a global
network of distributors.
The Company offers a broad line of fasteners, fastening systems and related
components. The Company's Kaynar and Microdot business units manufacture
precision, self-locking, internally threaded nuts and inserts and precision,
threaded studs. Kaynar and Microdot fasteners are engineered for a variety of
harsh, demanding environments and often require high tensile strength,
toughness, durability, corrosion resistance and resistance to metal fatigue and
creep. Kaynar's fasteners, which include wrenchable nuts, anchor nuts, gang
channels, shank nuts, barrel nuts, clinch nuts and stake nuts, are used in
airframe construction to fasten together various aircraft components, including
the fuselage, wings and horizontal and vertical stabilizers. These fasteners
also serve a similar function in the construction of aircraft jet and turboprop
engines and related components. Recoil, acquired by the Company in August 1996,
manufactures helically-wound wire thread inserts and thread repair kits, which
are similar in design to certain Microdot products, but are sold to the
automotive, electronic and other industrial markets, and their associated
after-markets. The Company's K-Fast business unit produces and markets tools
that are leased or sold to OEMs and are designed to allow operators to install
the Company's and other manufacturers' fasteners rapidly and in restricted and
hard-to-reach areas, while still maintaining precision torque control.
The principal executive offices of the Company are located at 800 S. State
College Blvd., Fullerton, California 92831, and its telephone number is (714)
871-1550.
THE PREDECESSOR COMPANY. As described below in "The Reorganization," Kaynar
Technologies Inc. ("Operating Company") is merging with and into the Company
immediately prior to the Offering. Operating Company, which was originally
called MKQ Acquisition Corp., was formed as a Delaware corporation on October
22, 1993, for the purpose of acquiring substantially all of the assets of the
Aerospace Fastening Systems Group ("AFSG") of Microdot Inc., a Delaware
corporation that commenced a voluntary bankruptcy proceeding under Chapter 11 of
the U.S. Bankruptcy Code on June 10, 1993 ("Old Microdot"). The Company, which
was known as Kaynar Holdings Inc. prior to the Reorganization, was also
incorporated in Delaware on October 22, 1993 to serve as the parent company of
Operating Company.
GECC was a creditor of Old Microdot and provided the Company and Operating
Company with financing for the AFSG asset acquisition, which was completed on
January 3, 1994. As consideration for the AFSG assets, GECC claims against Old
Microdot in the amount of $25.4 million were cancelled, and Operating Company
assumed certain of Old Microdot's liabilities. The Company and Operating Company
also paid approximately $1.2 million in cash to Old Microdot's British affiliate
for selected assets. As part of the acquisition financing, GECC purchased all of
the issued and outstanding shares of Series A Convertible Preferred Stock, par
value $.01 per share, of the Company ("Series A Preferred Stock") and all of the
issued and outstanding shares of Series B Preferred Stock, par value $.01 per
share, of the Company ("Series B Preferred Stock"). Members of the Company's
management purchased the remaining equity interests in the Company. See
"Principal Stockholders and Selling Stockholder." The Company intends to use the
proceeds of the Offering to discharge certain debt owed to GECC. See "Use of
Proceeds."
THE REORGANIZATION
In order to facilitate the Offering, immediately prior to the effectiveness
of the Offering, Operating Company is merging with and into the Company, with
the Company as the surviving corporation (the "Reorganization"). Immediately
following the Reorganization, the surviving corporation will be renamed
13
<PAGE>
"Kaynar Technologies Inc." Unless otherwise indicated, the term "Company" as
used herein shall mean the corporation surviving the merger, together with each
of its consolidated subsidiaries. In connection with the Reorganization, (i)
each outstanding share of Common Stock, par value $.01 per share, of Operating
Company will be cancelled and Operating Company will cease to exist, (ii) each
outstanding share of Common Stock, par value $.01 per share, of the Company (the
"Common Stock") will be exchanged for 68 shares of Common Stock, (iii) each
outstanding share of Series A Preferred Stock will be exchanged for 9.953 shares
of Common Stock and 58.047 shares of Series C Preferred Stock and (iv) each
outstanding share of Series B Preferred Stock will be exchanged for 68 shares of
Series C Preferred Stock. For further descriptions of the Common Stock and
Series C Preferred Stock, see "Description of Capital Stock."
Subsequent to the Reorganization and immediately prior to the Offering, GECC
will own 200,000 shares of Common Stock and all 5,206,000 issued and outstanding
shares of Series C Preferred Stock, which is convertible into Common Stock at a
one-to-one conversion rate, subject to adjustment in certain circumstances. GECC
will sell all of its 200,000 shares of Common Stock in the Offering.
For the purposes of the Prospectus, all discussion of the Company and its
ownership, business and operations and the number of shares of Common Stock
outstanding, except as otherwise indicated, are discussed on a pro forma basis,
giving effect to the Offering and the transactions described above.
USE OF PROCEEDS
Assuming an initial public offering price of $15.00 per share, the net
proceeds to the Company from the sale of the Common Stock offered hereby are
estimated to be $24.4 million ($28.6 million if the Underwriters' over-allotment
option is exercised in full), after deducting estimated underwriting discounts
and commissions and expenses. The Company will not receive any proceeds from the
sale of shares by the Selling Stockholder.
The Company intends to use approximately $7.0 million, $6.0 million and $4.9
million of the net proceeds from the Offering to discharge its obligations to
GECC under fixed rate loans, variable rate loans and a revolving credit
facility, respectively. At December 31, 1996, this indebtedness bore interest at
a weighted average interest rate of 10.4%. Amounts owed under the fixed rate and
variable rate loans are due and payable on January 3, 1999, which is the same
date that the revolving credit facility expires. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Certain Transactions." The remainder of the net proceeds
will be used for general corporate purposes, including capital expenditures and
working capital. A portion of the net proceeds may also be used to acquire other
companies or divisions of other companies. The Company, however, currently has
no agreements, commitments or understandings with respect to any acquisitions,
nor can there be any assurance that the Company will make any such acquisition
in the future.
Pending any of these uses, the Company intends to invest the net proceeds of
the Offering in short-term, investment grade, interest-bearing securities,
certificates of deposit or direct or guaranteed obligations of the United
States.
DIVIDEND POLICY
The Company currently intends to retain earnings, if any, to support the
development of its business and does not anticipate paying cash dividends on the
Common Stock for the foreseeable future. Payment of future dividends, if any,
will be at the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's earnings, financial condition,
operating results and current and anticipated cash needs, as well as such other
conditions as the Board of Directors may deem relevant. Furthermore, the payment
of dividends will be subject to the terms of the Company's outstanding financing
arrangements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
14
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1996, the capitalization
of the Company (i) giving effect to the Reorganization as if it had occurred on
that date and (ii) as adjusted to reflect the Offering and use of proceeds
therefrom. The table should be read in conjunction with "Selected Consolidated
Financial and Operating Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in the Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Revolving line-of-credit............................................................... $ 746 $ --
Long-term debt, including current portion:
Variable rate loans.................................................................. 38,225 32,225
Fixed rate loans..................................................................... 8,408 1,564
Capital lease obligations............................................................ 465 465
--------- -------
Total long-term debt............................................................... 47,098 34,254
--------- -------
Stockholders' equity:
Series C Convertible Preferred Stock, $.01 par value per share; 10,000,000 shares
authorized, and 5,206,000 shares issued and outstanding actual and as adjusted..... 52 52
Common Stock, $.01 par value per share; 20,000,000 shares authorized, 1,594,000
shares issued and outstanding actual and 3,394,000 shares issued and outstanding as
adjusted........................................................................... 16 34
Additional paid-in capital........................................................... 1,432 25,849
Retained earnings.................................................................... 8,838 8,838
Currency translation adjustment...................................................... 288 288
--------- -------
Total stockholders' equity......................................................... 10,626 35,061
--------- -------
Total capitalization............................................................. $ 57,724 $ 69,315
--------- -------
--------- -------
</TABLE>
- ------------------------
(1) As adjusted to reflect (i) the sale of 1,800,000 shares of Common Stock
offered by the Company hereby at an estimated initial public offering price
of $15.00 per share and (ii) the application of approximately $13.6 million
of the net proceeds to the reduction of certain indebtedness of the Company
as if such debt reduction occurred at December 31, 1996. The Company
anticipates that as of the date of the Offering, it will have increased its
borrowings under its revolving line-of-credit to approximately $4.9 million.
Accordingly, the total amount of the net proceeds that will be applied to
the reduction of certain indebtedness of the Company will approximate $18
million. See "Use of Proceeds."
DILUTION
The net tangible book value of the Company at December 31, 1996 was
approximately $2.8 million, or $0.41 per share of Common Stock (after giving
effect to the Reorganization), assuming the conversion by the Selling
Stockholder of all shares of Series C Preferred Stock into shares of Common
Stock as of such date. After giving effect to the Offering and the application
of the estimated net proceeds from the Offering (assuming an initial public
offering price of $15.00 per share), the Company's net tangible book value at
December 31, 1996 would have been $27.2 million, or $3.17 per share. "Net
tangible book value per share" is equal to the Company's total tangible assets
less its total liabilities, divided by the total number of shares of Common
Stock and Common Stock equivalents outstanding. This represents an immediate
increase in net tangible book value of $2.76 per share to existing stockholders
and an immediate
15
<PAGE>
dilution in net tangible book value of $11.83 per share to new investors
purchasing shares of Common Stock in the Offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of Common
Stock...................................................... $ 15.00
Net tangible book value per share at December 31, 1996... $ 0.41
Increase in net tangible book value per share
attributable to new investors.......................... $ 2.76
---------
Net tangible book value per share after the Offering......... $ 3.17
---------
Dilution per share to new investors.......................... $ 11.83
---------
</TABLE>
The following table summarizes (assuming the conversion of all shares of
Series C Preferred Stock into shares of Common Stock), as of December 31, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price paid per share by the existing
stockholders and by new investors (at an assumed initial public offering price
of $15.00 per share and before deducting estimated underwriting discounts and
commissions and expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION(1)
----------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 6,800,000(2) 79.1% $ 1,500,000 5.3% $ 0.22
New investors....................................... 1,800,000 20.9 27,000,000 94.7 15.00
---------- ----- ------------- -----
Total........................................... 8,600,000 100.0% $ 28,500,000 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
- ------------------------
(1) Assuming the Underwriters' over-allotment option is exercised in full, sales
of Common Stock by the Company in the Offering will reduce the number of
shares of Common Stock and Common Stock equivalents held by existing
stockholders to 76.4% of the total shares of Common Stock and Common Stock
equivalents to be outstanding after the Offering, and will increase the
number of shares held by new investors to 23.6% of the total number of
shares of Common Stock and Common Stock equivalents to be outstanding after
the Offering. See "Principal Stockholders and Selling Stockholder."
(2) Includes 5,206,000 shares of Series C Preferred Stock, which are convertible
into shares of Common Stock at a one-to-one conversion rate, subject to
adjustment in certain circumstances. See "Description of Capital
Stock--Series C Preferred Stock."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The selected consolidated financial and operating information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto, and other financial information included elsewhere
in the Prospectus. The Company was incorporated in October 1993 and began
operations on January 3, 1994 when it acquired substantially all of the assets
of AFSG. See "The Company--The Predecessor Company." The selected consolidated
financial and operating information for the years ended December 31, 1994, 1995
and 1996 is derived from the Consolidated Financial Statements of the Company
that have been audited by Arthur Andersen LLP, independent public accountants.
The selected consolidated financial and operating information for the years
ended December 31, 1992 and 1993 is derived from the unaudited financial
statements of AFSG, the Company's predecessor, and, in the opinion of the
Company's management, reflects all adjustments necessary to present the
financial results of AFSG fairly and on a basis consistent with the Company's
financial statements. The information for AFSG is presented to "Operating
income" because the borrowing arrangements and the tax position of Old Microdot
are not meaningful to the Company. The unaudited selected consolidated financial
and operating information for AFSG is provided for informational purposes only.
<TABLE>
<CAPTION>
AFSG COMPANY
-------------------- -------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996(1)
--------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................ $ 52,510 $ 46,378 $ 55,117 $ 68,781 $ 99,023
Cost of sales............................................ 38,975 35,933 41,117 51,940 72,924
--------- --------- --------- --------- ---------
Gross profit........................................... 13,535 10,445 14,000 16,841 25,099
Selling, general and administrative expenses (2)......... 8,194 8,239 9,048 10,018 13,263
--------- --------- --------- --------- ---------
Operating income....................................... 5,341 2,206 4,952 6,823 12,836
Interest expense, net.................................... 2,304 2,935 4,011
--------- --------- ---------
Income before income taxes............................. 2,648 3,888 8,825
Provision for income taxes............................... 1,129 1,577 3,530
--------- --------- ---------
Net income............................................. $ 1,519 $ 2,311 $ 5,295
--------- --------- ---------
--------- --------- ---------
Earnings per share (3)................................... $ 0.22 $ 0.34 $ 0.78
--------- --------- ---------
--------- --------- ---------
Weighted average number of shares
outstanding (3)........................................ 6,800 6,800 6,800
PRO FORMA INCOME STATEMENT DATA (4):
Pro forma earnings per share, as adjusted................ $ 0.76
---------
---------
Pro forma shares used in computing pro forma earnings per
share, as adjusted..................................... 8,600
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
DECEMBER 31, ----------------------
-------------------- AS
1994 1995 ACTUAL ADJUSTED(5)
--------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Working capital................................................... $ 15,563 $ 18,991 $ 30,188 $ 41,779
Total assets...................................................... 35,051 43,336 73,689 84,534
Total long-term debt, excluding capital leases.................... 23,176 25,148 46,633 33,789
Stockholders' equity.............................................. 2,944 5,157 10,626 35,061
</TABLE>
- ------------------------
(1) The Company acquired one business and one additional product line in 1996.
In August 1996, the Company purchased its Recoil business unit for
approximately $12.2 million and the assumption of certain liabilities. See
"Business--Products and Services--Industrial Products and Services." The
Recoil acquisition has been accounted for under the purchase method of
accounting and, accordingly, the operating results of Recoil have been
included in the Company's results of operations since mid-August 1996. In
February 1996, the Company purchased the KELOX product line from the
Fastening Systems division of Emhart Fastening Teknologies for $441,000 in
cash.
(2) Selling, general and administrative expenses of AFSG represent direct
expenses and do not include an allocation of corporate overhead or expenses
related to certain functions performed on a corporate-wide basis by Old
Microdot, such as risk management services, tax reporting and similar
corporate administrative functions.
(3) Earnings per share are computed based on the weighted average number of
shares of Common Stock and Common Stock equivalents outstanding. The
outstanding shares of Series C Preferred Stock are included as Common Stock
equivalents on an "as-if-converted" basis. See "Description of Capital
Stock--Series C Preferred Stock."
(4) Pro forma income statement data reflect the historical results for the year
ended December 31, 1996, adjusted to reflect (i) the sale of 1,800,000
shares of Common Stock offered by the Company hereby at an estimated initial
public offering price of $15.00 per share and (ii) the application of
approximately $18 million of the net proceeds to the reduction of certain
indebtedness of the Company as if such debt reduction occurred at January 1,
1996. The pro forma results also reflect interest income on the balance of
the Company's net proceeds from the Offering, assuming such proceeds were
invested at January 1, 1996.
(5) As adjusted to reflect (i) the sale of 1,800,000 shares of Common Stock
offered by the Company hereby at an estimated initial public offering price
of $15.00 per share and (ii) the application of approximately $13.6 million
of the net proceeds to the reduction of certain indebtedness of the Company
as if such debt reduction occurred at December 31, 1996. The Company
anticipates that as of the date of the Offering, it will have increased its
borrowings under its revolving line-of-credit to approximately $4.9 million.
Accordingly, the total amount of the net proceeds that will be applied to
the reduction of certain indebtedness of the Company will approximate $18
million. See "Use of Proceeds."
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading manufacturer of specialty fasteners, fastening
systems and related components primarily used by OEMs and their subcontractors
in the production of commercial aircraft and defense products. In addition, the
Company also manufactures other specialty fasteners and related products for
sale in the automotive, electronic and other industrial markets, and their
associated after-markets. The Company designs and manufactures a substantial
majority of its fasteners to its customers' specifications and in a wide range
of specialty metals, alloys and composites.
The Company supplies products to virtually all major airframe and aircraft
engine OEMs, including Boeing, GE, Pratt & Whitney, Airbus, Lockheed Martin,
McDonnell Douglas and Rolls Royce, as well as to a global network of
distributors. In 1996, approximately 65% of the Company's net sales were made
directly to OEMs and subcontractors. Direct sales to Boeing, GE and Pratt &
Whitney, the Company's three largest OEM customers, accounted for approximately
18%, 12% and 8% of the Company's 1996 net sales, respectively. The remaining 35%
of the Company's 1996 net sales were made to a global network of thirty-five
independent distributors, who sell the Company's products to OEMs,
subcontractors and other customers. Often, the OEMs will determine whether the
Company sells a product directly to the OEM or through an independent
distributor. See "Business--Sales and Marketing."
The Company generates a portion of its net sales from international
customers. The Company's direct net sales to foreign customers represented
approximately 9%, 10% and 14% of net sales for 1994, 1995 and 1996,
respectively. Although most of the Company's international sales are invoiced in
United States dollars, a portion is invoiced in foreign currencies. The Company
does not actively manage its foreign currency exposure and foreign currency
fluctuations may result in quarterly variations in the Company's net sales. The
Company has historically mitigated the impact of exchange rate fluctuations by
adjusting the prices of its products. There can be no assurance, however, that
the Company will be able to mitigate future exchange rate fluctuations through
the adjustment of product prices.
The Company acquired one business and one additional product line in 1996.
In August 1996, the Company purchased its Recoil business for approximately
$12.2 million and the assumption of certain liabilities. See "Business--Products
and Services--Industrial Products and Services." The Recoil acquisition has been
accounted for under the purchase method of accounting and, accordingly, the
operating results of Recoil have been included in the Company's results of
operations since mid-August 1996. In February 1996, the Company purchased the
KELOX product line from the Fastening Systems division of Emhart Fastening
Teknologies for $441,000 in cash. The KELOX product line complements various
Microdot inserts.
In the last three years, the Company's financial objectives have focused on
increasing sales and profitability. The Company's financial results over this
period reflect a high degree of leverage resulting from debt incurred to finance
the AFSG acquisition in January 1994 and to finance internal growth and
subsequent acquisitions. Using the net proceeds of the Offering, the Company
intends to reduce its leverage by retiring approximately $18 million of debt,
thereby reducing annual interest expense by approximately $1.8 million. See "Use
of Proceeds."
19
<PAGE>
RESULTS OF OPERATIONS
The following table is derived from the Company's Consolidated Statements of
Income for the periods indicated and presents the results of operations as a
percentage of net sales:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales............................................................ 100.0% 100.0% 100.0%
Cost of sales........................................................ 74.6 75.5 73.6
--------- --------- ---------
Gross profit....................................................... 25.4 24.5 26.4
Selling, general and administrative expenses......................... 16.4 14.6 13.4
--------- --------- ---------
Operating income................................................... 9.0 9.9 13.0
Interest expense, net................................................ 4.2 4.2 4.1
Provision for income taxes........................................... 2.0 2.3 3.6
--------- --------- ---------
Net income......................................................... 2.8% 3.4% 5.3%
--------- --------- ---------
--------- --------- ---------
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
NET SALES. Net sales increased 43.9%, or $30.2 million, to $99.0 million in
1996 from $68.8 million in 1995. This growth was primarily the result of
increased customer demand, which occurred as commercial aircraft build rates
increased. In addition, net sales growth was enhanced by the expansion of
existing product lines, the development of variations of existing products and
the introduction of new products. The Company's acquisition of Recoil and its
purchase of the KELOX product line accounted for approximately $5 million of the
increase in net sales.
GROSS PROFIT. Gross profit increased 55.4% to $26.1 million or 26.4% of net
sales in 1996 from $16.8 million or 24.5% of net sales in 1995. This improvement
in gross profit margin was primarily due to the increase in sales volume, which
resulted in a greater absorption of fixed costs. Capital expenditures during the
past three years for more efficient production equipment also contributed to the
improvement in gross profit margin. In addition, gross profit margin in 1996
benefited from increased sales of Recoil and Microdot inserts and studs, which
are generally higher margin products, and improved materials utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 33.0% to $13.3 million in 1996 from $10.0
million in 1995. As a percentage of net sales, however, selling, general and
administrative expenses decreased to 13.4% in 1996 from 14.6% in 1995. This
decrease was primarily attributable to increased sales volumes. The $3.3 million
increase in the absolute dollar amount of such expenses, however, was
attributable primarily to (i) additional employee costs needed to support the
increased sales volume and (ii) the selling, general and administrative expenses
of Recoil, which, due to the nature of its business, tends to have higher
selling, general and administrative expenses as a percentage of net sales than
the Company's Kaynar and Microdot business units.
INTEREST EXPENSE. The Company's average outstanding borrowings increased to
$38.2 million in 1996 from $28.3 million in 1995. This increase related
primarily to (i) increased working capital requirements to support the Company's
growth, (ii) capital expenditures and (iii) the Recoil acquisition. The weighted
average interest rate on these borrowings in 1996 was 10.2% (compared to 10.3%
in 1995), resulting in a 37.9% increase in net interest expense, from $2.9
million in 1995 to $4.0 million in 1996.
NET INCOME. The Company recorded net income of $5.3 million in 1996, or
$0.78 per share, compared to $2.3 million, or $0.34 per share, in 1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
NET SALES. Net sales increased 24.8%, or $13.7 million, to $68.8 million in
1995 from $55.1 million in 1994. This growth was primarily the result of an
increase in customer demand, which occurred as
20
<PAGE>
commercial aircraft build rates increased. In addition, net sales growth was
enhanced by the expansion of existing product lines, the development of
variations of existing products and the introduction of new products.
GROSS PROFIT. Gross profit increased 20.0% to $16.8 million or 24.5% of net
sales in 1995 from $14.0 million or 25.4% of net sales in 1994. The decrease in
gross profit as a percentage of net sales was the result of increased personnel
costs incurred to increase capacity and increases in the cost of raw materials.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 11.1% to $10.0 million in 1995 from $9.0
million in 1994. As a percentage of net sales, however, selling, general and
administrative expenses decreased to 14.6% in 1995 from 16.4% in 1994. This
decrease was primarily attributable to increased sales volumes.
INTEREST EXPENSE. The Company's average outstanding borrowings increased to
$28.3 million in 1995 from $26.0 million in 1994. This increase related
primarily to (i) increased working capital requirements to support the Company's
growth and (ii) capital expenditures. The weighted average interest rate on
these borrowings in 1995 was 10.3% (compared to 8.9% in 1994), resulting in a
26.1% increase in net interest expense, from $2.3 million in 1994 to $2.9
million in 1995.
NET INCOME. The Company recorded net income of $2.3 million for 1995, or
$0.34 per share, compared to $1.5 million, or $0.22 per share, in 1994.
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly financial
information for the eight fiscal quarters of the two years ended December 31,
1996 and such data expressed as a percentage of net sales for such periods. This
information is derived from, and should be read in connection with, the
Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in the Prospectus. In the opinion of management, these results contain
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the unaudited quarterly results of operations set forth
herein. The Company's results of operations for any previous fiscal quarter of
any year may not be comparable with its results of operations for the same
quarter of any other year and are not necessarily indicative of results for any
future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
(UNAUDITED)
APRIL 2, JULY 2, OCT. 1, DEC. 31, MAR. 31, JUNE 30, SEPT. 29,
1995 1995 1995 1995 1996 1996 1996
----------- --------- --------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.......................... $ 14,626 $ 17,704 $ 18,041 $ 18,410 $ 20,662 $ 23,228 $ 26,013
Cost of sales...................... 11,478 13,197 13,821 13,444 15,192 17,178 19,440
----------- --------- --------- ----------- ----------- ----------- -----------
Gross profit..................... 3,148 4,507 4,220 4,966 5,470 6,050 6,573
Selling, general and administrative
expenses.......................... 2,279 2,509 2,626 2,604 2,785 2,994 3,503
----------- --------- --------- ----------- ----------- ----------- -----------
Operating income................. 869 1,998 1,594 2,362 2,685 3,056 3,070
Interest expense, net.............. 684 726 751 774 823 846 1,082
Provision for income taxes(1)...... 75 516 342 644 745 884 795
----------- --------- --------- ----------- ----------- ----------- -----------
Net income....................... $ 110 $ 756 $ 501 $ 944 $ 1,117 $ 1,326 $ 1,193
----------- --------- --------- ----------- ----------- ----------- -----------
----------- --------- --------- ----------- ----------- ----------- -----------
<CAPTION>
DEC. 31,
1996
-----------
<S> <C>
INCOME STATEMENT DATA:
Net sales.......................... $ 29,120
Cost of sales...................... 21,114
-----------
Gross profit..................... 8,006
Selling, general and administrative
expenses.......................... 3,981
-----------
Operating income................. 4,025
Interest expense, net.............. 1,260
Provision for income taxes(1)...... 1,106
-----------
Net income....................... $ 1,659
-----------
-----------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
(UNAUDITED)
APRIL 2, JULY 2, OCT. 1, DEC. 31, MAR. 31, JUNE 30, SEPT. 29,
1995 1995 1995 1995 1996 1996 1996
----------- --------- --------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
AS A PERCENTAGE OF NET SALES:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................... 78.5 74.5 76.6 73.0 73.5 74.0 74.7
----------- --------- --------- ----------- ----------- ----------- -----------
Gross profit................... 21.5 25.5 23.4 27.0 26.5 26.0 25.3
Selling, general and administrative
expenses.......................... 15.6 14.2 14.6 14.2 13.5 12.9 13.5
----------- --------- --------- ----------- ----------- ----------- -----------
Operating income................. 5.9 11.3 8.8 12.8 13.0 13.1 11.8
Interest expense, net.............. 4.7 4.1 4.2 4.2 4.0 3.6 4.1
Provision for income taxes......... 0.5 2.9 1.9 3.5 3.6 3.8 3.1
----------- --------- --------- ----------- ----------- ----------- -----------
Net income....................... 0.7% 4.3% 2.7% 5.1% 5.4% 5.7% 4.6%
----------- --------- --------- ----------- ----------- ----------- -----------
----------- --------- --------- ----------- ----------- ----------- -----------
<CAPTION>
DEC. 31,
1996
-----------
AS A PERCENTAGE OF NET SALES:
<S> <C>
Net sales.......................... 100.0%
Cost of sales...................... 72.5
-----------
Gross profit................... 27.5
Selling, general and administrative
expenses.......................... 13.7
-----------
Operating income................. 13.8
Interest expense, net.............. 4.3
Provision for income taxes......... 3.8
-----------
Net income....................... 5.7%
-----------
-----------
</TABLE>
The Company's net sales have increased in each of the eight fiscal quarters
ended December 31, 1996 primarily due to increases in customer demand, which
occurred as commercial aircraft build rates increased. In addition, net sales
growth was enhanced by the expansion of existing product lines, the development
of variations of existing products and the addition of new products. While the
cost of sales has fluctuated, cost of sales as a percentage of net sales has
generally declined over this period due to decreased unit costs associated with
increased production. Selling, general and administrative expenses have
generally increased over this period, but have generally decreased as a
percentage of net sales, primarily as a result of increased sales volume.
The Company's financial results have fluctuated from fiscal quarter to
fiscal quarter and may continue to do so in the future. These variations have
been due to a number of factors, including customer requirements, the timing of
shipments, changes in the type and mix of products being sold, changes in
manufacturing capacity, variations in the utilization of manufacturing capacity
and variations in the number of working days in a given fiscal quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs, capital expenditures and scheduled payments of interest on its
indebtedness to GECC. The Company's working capital requirements have increased
as a result of higher accounts receivable and higher inventory levels needed to
support its growth in net sales. The Company's working capital was $30.2 million
as of December 31, 1996, compared to $19.0 million as of December 31, 1995 and
$15.6 million as of December 31, 1994.
In December 1996, the Company amended its Credit Agreement with GECC (the
"Credit Agreement") to provide for a $15.0 million revolving line-of-credit (the
"Revolver"), the availability of which is limited by the lesser of a specified
portion of qualified accounts receivable and $15.0 million. The Credit Agreement
contains significant financial and operating covenants, including limitations on
the Company's ability to incur additional indebtedness and restrictions on the
payment of dividends. The Company currently is in compliance with all such
financial ratios and covenants. At December 31, 1996, borrowings under the
Revolver, which bear interest at the prime rate plus 1.5% (which was 9.75% as of
December 31, 1996), totaled $746,000, and the amount available for borrowing
thereunder was approximately $10 million. The Company anticipates that prior to
the consummation of the Offering, it will have increased its borrowings under
the Revolver to a total of approximately $4.9 million, principally to pay
accrued, Company-wide annual employee bonuses and to fund working capital needs
in connection with increases in net sales. The Company intends to use a portion
of the net proceeds of the Offering to repay all amounts owed under the
Revolver. See "Use of Proceeds." The Credit Agreement expires on January 3,
1999.
From time to time, GECC has also made certain variable rate loans to the
Company for use in connection with the AFSG and Recoil acquisitions and for
working capital purposes and capital expenditures (collectively, the "Variable
Rate Loans"). At December 31, 1996, the aggregate outstanding principal
22
<PAGE>
under the Variable Rate Loans was $38.2 million. Interest on these loans is
payable monthly at a rate equal to the prime rate plus 1.5% (which was 9.75% as
of December 31, 1996). The Variable Rate Loans, which are subject to the same
financial and operating covenants as the Revolver, are due and payable on
January 3, 1999. The Company intends to use approximately $6.0 million of the
net proceeds of the Offering to repay these loans. See "Use of Proceeds."
In January 1994, in connection with the capitalization of the Company and
the payment of dividends on the Series A and Series B Preferred Stock, the
Company borrowed certain other amounts from GECC which accrued interest at the
rate of 9.5% for the period from January 3, 1994 to December 31, 1995 and will
accrue interest at the rate of 11.5% from January 1, 1996 until the loan is paid
in full (collectively, the "Fixed Rate Loans"). Interest on the Fixed Rate Loans
is payable quarterly and may be deferred and added to the outstanding principal
balance. At December 31, 1996, approximately $6.8 million in principal and
interest was outstanding under the Fixed Rate Loans, all of which will be repaid
in full using the net proceeds of the Offering. See "Use of Proceeds." The Fixed
Rate Loans are due and payable on January 3, 1999.
For the year ended December 31, 1996, net cash provided by operating
activities was $4.3 million, as compared to net cash used in operating
activities of $150,000 for the year ended December 31, 1995 and net cash
provided by operating activities of $1.7 million for the year ended December 31,
1994. The primary sources of cash from operations during 1996 included net
income of $5.3 million, non-cash charges for depreciation and amortization of
$2.6 million, an increase in accrued expenses of $3.2 million (which was
primarily attributable to accrued, Company-wide annual employee bonuses) and an
increase in accounts payable of $2.4 million, offset by increases in accounts
receivable and inventories of $2.5 million and $6.9 million, respectively. The
primary sources of cash from operations during 1995 included net income of $2.3
million, non-cash charges for depreciation and amortization of $1.8 million, an
increase in accounts payable of $1.1 million and an increase in accrued expenses
of $1.1 million (which was primarily attributable to accrued, Company-wide
annual employee bonuses), offset by increases in accounts receivable and
inventories of $3.5 million and $3.4 million, respectively.
The Company's capital expenditures were $2.4 million, $3.3 million and $6.9
million in 1994, 1995 and 1996, respectively. In 1996, the Company also used
$12.6 million in cash in connection with the Recoil acquisition and the purchase
of the KELOX product line. The Company's net cash provided by financing
activities in 1996 was $16.7 million, consisting entirely of net borrowings on
long-term debt, as compared to borrowings of $3.1 million in 1995 and $542,000
in 1994.
The Company expects to spend approximately $8.0 million for capital
expenditures in 1997. These capital expenditures will relate principally to
equipment purchases intended to expand capacity and enhance operating efficiency
at the Company's existing facilities.
The Company believes that the net proceeds from the Offering, internally
generated cash flow and amounts that may be available under the Revolver will
provide adequate funds to meet its working capital needs, planned capital
expenditures and debt service obligations. However, the Company's ability to
fund its operations, make planned capital expenditures and make scheduled
payments on, and refinance, its indebtedness depends on its future operating
performance and cash flow. Future operating performance and cash flow are, in
turn, subject to prevailing economic conditions and to financial, business and
other factors affecting the Company, some of which are beyond the Company's
control.
23
<PAGE>
BUSINESS
GENERAL
The Company is a leading manufacturer of specialty fasteners, fastening
systems and related components primarily used by OEMs and their subcontractors
in the production of commercial aircraft and defense products. In addition, the
Company also manufactures other specialty fasteners and related products for
sale in the automotive, electronic and other industrial markets, and their
associated after-markets. The Company designs and manufactures a substantial
majority of its fasteners to its customers' specifications and in a wide range
of specialty metals, alloys and composites.
The Company's Kaynar and Microdot business units manufacture precision,
self-locking, internally threaded nuts and inserts and precision, threaded
studs. Kaynar and Microdot fasteners are engineered for a variety of harsh,
demanding environments and often require high tensile strength, toughness,
durability, corrosion resistance and resistance to metal fatigue and creep.
Kaynar's fasteners, which include wrenchable nuts, anchor nuts, gang channels,
shank nuts, barrel nuts, clinch nuts and stake nuts, are used in airframe
construction to fasten together various aircraft components, including the
fuselage, wings and horizontal and vertical stabilizers. These fasteners also
serve a similar function in the construction of aircraft jet and turboprop
engines and related components. Recoil, acquired by the Company in August 1996,
manufactures helically-wound wire thread inserts and thread repair kits, which
are similar in design to certain Microdot products, but are sold to the
automotive, electronic and other industrial markets, and their associated
after-markets. The Company's K-Fast business unit produces and markets tools
that are leased or sold to OEMs and are designed to allow operators to install
the Company's and other manufacturers' fasteners rapidly and in restricted and
hard-to-reach areas, while still maintaining precision torque control.
The Company's goal is to achieve long-term, profitable growth by (i)
enhancing its position as a leading supplier of specialty fasteners to the
commercial aircraft and defense industries, (ii) expanding the array of fastener
products and services it offers to current customers, (iii) continuing to focus
on higher value-added specialty products, (iv) leveraging its core capabilities
in engineering, materials technology, manufacturing and business processes to
develop additional business with both new and existing customers, (v) increasing
its international marketing and penetration of foreign markets and (vi) pursuing
selected opportunities for acquisitions and strategic alliances.
INDUSTRY OVERVIEW AND TRENDS
COMMERCIAL AIRCRAFT MARKET
The Company's primary market for fasteners, the worldwide commercial
aircraft industry, is experiencing a strong increase in demand from airlines
ordering new and replacement aircraft. Many airlines, particularly U.S.
carriers, incurred substantial losses during the early 1990s. Factors which led
to these losses included (i) a slowdown in world economic growth, (ii) a decline
in air passenger traffic and (iii) the delivery of a record number of previously
purchased aircraft to the airlines, all of which created excess aircraft
capacity. This excess capacity, coupled with the weakened financial condition of
many airlines, significantly impacted their purchases of new and replacement
aircraft. Beginning in 1994, a rebound in the world economy and an increase in
air passenger traffic helped many airlines restore and increase their
profitability. As a result, the airlines have also increased their purchases of
new and replacement aircraft, contributing to a significant recovery in the
worldwide commercial aircraft industry. In 1996, for example, Boeing and Airbus,
the two largest commercial aircraft manufacturers, reported increases in
announced aircraft orders of 107% and 208% over 1995 levels, respectively.
Increased demand for new and replacement aircraft has led to an increase in the
demand for fasteners and fastening systems, such as those manufactured by the
Company.
While there can be no assurance that demand for new and replacement aircraft
will not be adversely affected by business cycle fluctuations or declines in
airline profitability, the Company believes that long-term industry trends are
favorable. For example, in its 1996 Current Market Outlook report, Boeing
24
<PAGE>
projects that during the period from 1995 to 2005, world air travel will grow by
approximately 70%. Boeing also projects that during this period domestic and
international airlines will lease or purchase approximately 7,000 new aircraft,
thereby increasing the worldwide commercial fleet from approximately 11,000
aircraft at the end of 1995 to approximately 16,000 aircraft (net of
retirements) at the end of 2005. In addition, as airlines seek to serve a
growing number of air travelers with existing restrictions on arrival and
departure slots, airport gates and ramp capacity, commercial aircraft OEMs are
experiencing increased orders for heavier, widebodied aircraft of intermediate
size. Widebodied aircraft generally require a greater number of fasteners than
smaller aircraft.
DEFENSE MARKET
The Company also directly and indirectly supplies fasteners and related
components to manufacturers of airframes, aircraft engines, missiles and other
products used for defense. Since the late 1980s, decreasing levels of defense
procurement spending have reduced the size of the defense market, with contracts
often reflecting lower build rates and extended production schedules. The U.S.
military budget, in particular, has focused principally on operations and
maintenance funding for the existing force structure rather than on procurement
of new equipment. Due in part to these budget constraints, the defense industry
has been consolidating, thereby reducing the overall number of customers
available to the Company and other suppliers.
The Company's products are primarily utilized on military aircraft,
including fighters and transport aircraft. Although the number of fighter
aircraft expected to be produced is likely to decrease through the year 2000,
this decrease may be offset in part by increased production of military
transport aircraft such as the C-130J and the C-17. In addition, a number of
fighter and other aircraft programs may be implemented to modernize the air
forces of the industrialized western nations and their allies. Such programs
that are either under development or contemplated include the F/A-18E/F (an
advanced variant of the existing F/A-18 fighter bomber), the F-22 (the
next-generation advanced fighter) and the EFA (European Fighter Aircraft). The
first two programs are in preliminary production stages in the United States.
The military programs of the United Kingdom, Germany, Italy and Spain have
committed to the EFA, which is scheduled to begin production in 2000. In
addition, although there can be no assurance that the proposed fiscal 1998 U.S.
military budget will be adopted as proposed, the budget proposed by the
President projects an increase in procurement spending for aircraft. There can
be no assurance, however, that the production of military transport aircraft
will increase, that proposed aircraft programs under development or contemplated
will be completed or that any projected increase in U.S. defense procurement
spending will result in increased demand for the Company's products.
PRODUCTS AND SERVICES
The Company's fasteners, fastening systems and related components may be
divided into two general categories: those used exclusively in the manufacture
of commercial aircraft and defense products (see "--Commercial Aircraft and
Defense Products") and those with applications in other industries (see
"--Industrial Products and Services"). Within these two broad categories, the
Company's products may also be grouped by business unit. The Company's Kaynar
and Microdot business units manufacture fasteners and related products that are
sold principally to the commercial aircraft and defense industries. The
Company's recently-acquired Recoil business manufactures thread insert systems
used in a broad range of markets, including high performance automotive and
electronic components. The Company's K-Fast business unit produces, sells,
leases and services a complete line of installation tools and tooling systems
for the Kaynar, Microdot and Recoil product lines, as well as for fasteners and
inserts produced by other manufacturers.
COMMERCIAL AIRCRAFT AND DEFENSE PRODUCTS
A substantial portion of the Company's net sales are made to the commercial
aircraft and defense industries. Of the Company's net sales in 1996,
approximately 40% were made to airframe OEMs and their subcontractors, and
approximately 21% were made to producers of aircraft engines. In addition, the
25
<PAGE>
Company sold approximately 31% of its production to independent distributors,
who in turn are believed to have sold many of such products to commercial
aircraft and defense OEMs and subcontractors.
KAYNAR PRODUCTS
Kaynar is a leading producer of precision, self-locking internally threaded
nuts used in the manufacture of commercial aircraft and defense aerospace
products. In 1996, sales of Kaynar products accounted for approximately 78% of
the Company's net sales.
The Kaynar product line is designed principally for use in harsh, demanding
environments and includes wrenchable nuts, K-Fast nuts, anchor nuts, gang
channels, shank nuts, barrel nuts, clinch nuts and stake nuts. Wrenchable nuts,
which offer versatility in airframe construction, are designed for high-strength
and vibration resistance and to ensure precision torquing of fastener
assemblies. K-Fast nuts, which are lightweight, wrenchable nuts in various
configurations, permit high-speed application using K-Fast installation tools.
Anchor nuts, which may be riveted, welded or bonded to a structure, are
especially useful in blind locations or in locations where an attached nut
facilitates maintenance. Gang channel nut assemblies, which may be produced in
either straight or radiused versions, are designed for applications that require
multiple anchor-type nuts. Shank nuts, which are highly temperature resistant,
are designed for jet and rocket engine flange assemblies, such as exhaust
manifolds, afterburners and turbine flanges. Barrel nuts are high strength,
self-locking nuts used in locations where wrenching space is not available.
Clinch nuts and stake nuts are designed for blind applications where hexagonal
nuts would be inaccessible for wrenching, or where conditions prevent the
installation of an anchor nut.
Kaynar produces fasteners in a wide variety of materials to accommodate each
customer's specifications, from lightweight aluminum or titanium nuts for
airframes, to high-strength, high-temperature tolerant engine nuts manufactured
from materials such as A-286, Waspaloy-Registered Trademark-,
Hastelloy-Registered Trademark- and Inconel-Registered Trademark-. Kaynar also
produces the commercial aircraft and defense industries' broadest line of
lightweight, non-metallic composite fasteners, which may be configured as
wrenchable nuts, anchor nuts, gang channels or barrel nuts. These composite
fasteners are used primarily for military aircraft and are designed to reduce
radar visibility, enhance resistance to lightning strikes and provide galvanic
corrosion protection. Kaynar offers a variety of coatings and finishes for its
fasteners, including anodizing, cadmium plating, silver plating, aluminum
plating, solid film lubricants and water-based cetyl and solvent-free
lubricants.
MICRODOT PRODUCTS
Microdot, which accounted for approximately 14% of the Company's 1996 net
sales, designs, engineers and manufactures threaded inserts and studs used
principally in the commercial aircraft and defense industries.
Microdot's threaded inserts, which are made of high-grade steel and other
high-strength metals, are designed to be installed into softer metals, plastics
and composite materials to create bolt-ready holes having strong internal
threads within the softer parent material. Once a bolt is threaded into the
installed insert, the overall strength of the fastening assembly is
substantially enhanced. The Company's customers may also use Microdot inserts
for thread repairs. When the existing internal threads on an airframe or engine
component become stripped or are otherwise damaged, the customer will retap the
hole and insert a Microdot insert, thereby recreating the internal threads.
Microdot's K-Sert-Registered Trademark- Inserts include keys that are driven
down through the threads of parent material, mechanically locking the insert in
place to prevent rotation due to vibration and to resist torque-out. Microdot
also produces Perma-Thread-Registered Trademark- Inserts and thin-wall inserts.
Perma-Thread Inserts are helically-coiled inserts, precision formed from diamond
shaped stainless steel wire wound into strong permanent thread. The Perma-Thread
Inserts compress as they are inserted into an internally threaded hole to create
a strong permanent thread inside the hole. Thin-wall inserts are designed for
situations that require a smaller lightweight fastener but also demand a high
degree of thread protection and fastening integrity.
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<PAGE>
In addition, Microdot produces K-Sert Studs, which are also made from steel
and other high-strength metals. The keyed end of the stud is designed to be
installed into parent material using a process similar to the insertion of
K-Sert Inserts. The other end of the stud is threaded and protrudes from the
parent material so that other components may be securely attached to the parent
airframe or engine component. Like K-Sert Inserts, K-Sert Studs include locking
keys that prevent rotation and provide resistance to torque-out.
INDUSTRIAL PRODUCTS AND SERVICES
The products designed and manufactured by the Company's recently acquired
Recoil business unit have applications in a variety of industries, including the
automotive and electronics markets. The Company's K-Fast products primarily
serve the commercial aircraft and defense industries, but are also used in other
industrial markets. Recoil, which the Company acquired in August 1996, and
K-Fast each accounted for approximately 4% of the Company's 1996 net sales. For
the four-month period ended December 31, 1996, Recoil accounted for
approximately 8% of the Company's net sales.
RECOIL PRODUCTS
Recoil produces helically-wound wire thread inserts that increase the
strength of a fastening assembly and assist in the reduction of thread wear,
which is particularly important in cases where components are assembled and
disassembled frequently or where vibrations are severe. Although Recoil inserts
are similar in design to Microdot's Perma-Thread Inserts, Recoil serves a
different customer base and sells a greater percentage of its products for use
in thread repair, rather than original installation. Recoil inserts are used in
the automotive, electronic and other industrial markets, and their associated
after-markets.
In addition to threaded inserts, Recoil also supplies both standard and
customized thread repair kits, high speed steel taps and various electric and
pneumatic, manual and semi-automatic insertion tools and related accessories.
Recoil's distributors market thread repair kits to the public using
custom-designed point-of-sale displays. Principal uses for the thread repair
kits include automotive repair and the maintenance and repair of heavy
machinery.
Recoil products are designed and manufactured in stainless steel and a wide
variety of other materials to meet customer specifications, including
Inconel-Registered Trademark- for high temperature applications and phosphorous
bronze for low permeability. Recoil inserts are often coated with finishes such
as cadmium and silver to prevent corrosion, and dry film lubricants to prevent
galling and binding.
K-FAST PRODUCTS AND SERVICES
K-Fast tools are primarily designed to install Kaynar, Microdot and Recoil
fasteners and inserts, but can also be used to attach other wrenchable nuts,
bolts and inserts. K-Fast tools allow customers to install fasteners rapidly and
in restricted and hard-to-reach areas, while still maintaining precision torque
control. K-Fast tools, which may be incorporated into a customer's automatic and
semi-automatic application operations, also permit precise re-torquing of
fasteners that have already been installed. K-Fast tools are ergonomically
designed to reduce noise and operator fatigue. The Company outsources the
production of motors for the K-Fast tools.
Many OEMs lease K-Fast tools from the Company instead of purchasing them.
The Company also services tools purchased or leased by its customers and trains
its customers to use the tools. The Company currently has eleven service
engineers located throughout North America and Europe, who are able to provide
customers with on-site service of, and training for, K-Fast tools. The Company
intends to continue to pursue opportunities on the service side of its tooling
and tooling systems business.
KEY COMPETITIVE STRENGTHS
MARKET LEADER. The Company believes that it is the leading manufacturer of
precision, self-locking internally threaded nuts sold to the commercial aircraft
and defense aerospace industries, and a leading
27
<PAGE>
manufacturer of other specialty fasteners, fastening systems and related
components used in the manufacture of commercial aircraft and defense products.
The Company also believes it offers customers one of the broadest arrays of
fasteners, fastening systems and related services. Once a fastener manufactured
by the Company has been "designed into" a particular airframe or engine
component, the OEM will generally rely on the Company to provide the fastener
for the entire production cycle of the airframe or engine, which could last a
decade or more. This relationship with OEMs further enhances the Company's
position as a market leader.
RAPID CUSTOMER RESPONSE. The Company's product design and engineering
capabilities and its manufacturing expertise give it the ability to respond
rapidly to customer demands for new products and product modifications. Once a
customer submits specifications for a product, the Company utilizes its
forty-three person engineering and product design group to meet the customer's
demands and expectations for product development and manufacturing, installation
tooling development and application engineering. The Company's engineering and
product design personnel are organized into cross-functional design teams to
enhance the Company's responsiveness. Often customers will place multiple orders
for short runs of different products. The Company has the expertise in complex
manufacturing processes necessary to fill such orders within the timeframes
required by its customers.
CORE SUPPLIER. Many OEMs have reduced the number of suppliers for
particular parts to a core group of two or three who have the size, expertise
and capacity to meet the OEMs' needs. Such reductions allow an OEM to (i) reduce
purchasing costs, (ii) streamline purchasing decisions, (iii) maintain greater
control over quality and (iv) develop close supplier relationships.
Participating in this trend, the Company continues to be a qualified supplier to
virtually all major airframe and aircraft engine OEMs on the parts it designs
and manufactures. In addition, the Company has never lost its qualified supplier
status with respect to any product. The Company believes that as the OEMs have
undertaken these reductions, the Company has often achieved incremental
increases in its business.
SOURCE DELEGATION SUPPLIER. The Company's experience and its strong,
long-term relationships with OEMs, coupled with its customer-driven approach to
quality control, engineering and production, have allowed it to qualify as a
"source delegation supplier" to many of its customers, including Boeing, GE and
Pratt & Whitney. See "--Customers." A source delegation supplier's products are
designed, shipped and installed without the OEM undertaking further testing that
it might otherwise perform before installation. An OEM will only designate a
supplier as a source delegation supplier after the OEM has undertaken a rigorous
review of both the supplier's products and its manufacturing processes. This
review process often takes several years.
EFFICIENCY AND QUALITY CONTROL. The Company has implemented a series of
programs designed to improve operating efficiency while at the same time
maintaining or improving quality control. As a result, the Company believes that
since 1994 it has, among other things, significantly reduced its (i) new product
design times, (ii) average lead times on production and (iii) rates of past due
orders. Continuous improvement teams, re-engineering teams, Kaizen events (a
self-directed process improvement program) and an incentive bonus plan that
rewards all employees, other than Recoil personnel, based upon the return on
capital employed by the Company's business units are among the quality
improvement tools currently used by the Company in its efforts to reduce costs
and improve customer service. The Company has also recently begun implementing
an automated statistical process control ("SPC") system that will replace its
current manual system for recording statistical information at each stage of the
production process. The automated SPC system, which is already running in
certain areas of the Company's business, should be fully operational by
mid-1997.
COMPANY STRATEGY
The Company's goal is to sustain long-term profitable growth by focusing on
the following areas:
MAINTAINING KEY COMPETITIVE STRENGTHS. The Company intends to maintain and
further develop its key competitive strengths, including its leading position in
the market for specialty fasteners and fastening
28
<PAGE>
systems used in the manufacture of commercial aircraft and defense products. See
"--Key Competitive Strengths."
EXPANDING FASTENER PRODUCTS AND SERVICES. The Company will continue to
introduce new fastener products and services to the commercial aircraft, defense
and other industrial markets. The Company also plans to continue augmenting its
existing array of products and services by qualifying new fasteners and
fastening systems, introducing new packaged thread repair kits in the automotive
after-market and expanding its installation tooling products and repair
services.
FOCUSING ON HIGHER VALUE-ADDED PRODUCTS. Kaynar and Microdot, the Company's
two largest business units, manufacture nuts, inserts and studs that are
engineered for a variety of harsh, demanding environments and often require high
tensile strength, toughness, durability, corrosion resistance and resistance to
metal fatigue and creep. To meet these demands, the Company employs higher
value-added manufacturing processes than would be required if the fasteners were
designed for less demanding environments. These processes include manufacturing
expertise in a wide range of specialty metals, alloys and composites. The
Company intends to continue to focus on engineering and manufacturing such
specialty products.
LEVERAGING CORE CAPABILITIES. The Company intends to grow by leveraging its
core capabilities in engineering, materials technology, manufacturing and
business processes. The Company believes that with these capabilities, it can
develop new business opportunities with current customers, beyond existing
fastener applications. The Company will also use its core capabilities as a
basis for moving into related markets that it does not currently address.
INCREASING INTERNATIONAL MARKETING. The commercial aircraft industry is
becoming increasingly international, as component and sub-assembly manufacturers
overseas obtain significant contracts from major airframe and aircraft engine
OEMs. The Company plans to continue to increase its international presence to
capitalize on opportunities for growth in the expanding international commercial
aircraft market. The Company's strategy includes continued penetration into
foreign markets. The Company, for example, has recently placed an on-site sales
engineer in Beijing, China and a direct salesperson in Mexico City, Mexico. See
"--Sales and Marketing."
GROWING THOUGH ACQUISITIONS AND STRATEGIC ALLIANCES. The Company
selectively reviews opportunities to acquire other companies, assets and product
lines that add to or complement its existing products and services. The Company
successfully completed the Recoil acquisition and the purchase of the KELOX
product line in 1996 and believes that other potentially complementary
acquisitions may be possible as consolidation continues in the commercial
aircraft and defense industries. The Company, however, currently has no
agreements, commitments or understandings with respect to any acquisitions, nor
can there be any assurance that the Company will make any such acquisitions in
the future.
CUSTOMERS
In 1996, approximately 65% of the Company's net sales were made directly to
OEMs and subcontractors. Direct sales to Boeing, GE and Pratt & Whitney, the
Company's three largest OEM customers, accounted for approximately 18%, 12% and
8% of the Company's 1996 net sales, respectively. The remaining 35% of the
Company's 1996 net sales were made to a global network of thirty-five
independent distributors, who sell the Company's products to OEMs,
subcontractors and other customers. See "--Sales and Marketing."
The Company is currently a "source delegation supplier" of certain products
to the following OEMs: Boeing, GE, Pratt & Whitney, Lockheed Martin, McDonnell
Douglas, Air Supply (a unit of AlliedSignal Inc.), Ultra Electronics Ltd. and
Williams International Co. A source delegation supplier's products are designed,
shipped and installed without the OEM undertaking further testing that it might
otherwise perform before installation. See "--Key Competitive Strengths--Source
Delegation Supplier." In addition to its source delegation designations, the
Company is also a qualified supplier under the preferred supplier programs of
most other major airframe and aircraft engine OEMs and subcontractors, including
Allison
29
<PAGE>
Engine Co., Loral Vought Systems Corp., Northrop Grumman Corp., Rocketdyne (a
unit of Rockwell International Corp.), Rohr Inc. and Rolls Royce.
BACKLOG
The Company's backlog at December 31, 1996 was approximately $65.5 million,
approximately 92% of which is scheduled to be delivered during 1997. The
Company's total backlog as of December 31, 1995 was approximately $41.2 million.
The following chart shows the quarterly backlog orders believed by
management to be deliverable within the twelve months following each quarter
end:
[Chart setting forth, for the years 1994, 1995 and 1996, the information
described in the preceding paragraph.]
ENGINEERING AND PRODUCT DEVELOPMENT
The Company employs approximately 43 engineers and designers. At Kaynar and
Microdot, these employees are assigned to cross-functional design teams, which
work together to develop new products and improve existing products. Each design
team includes personnel from the following functional areas: production design,
tool design, manufacturing engineering and production engineering. The use of
design teams is intended to reduce the overall time needed to bring products to
market.
The development of a new fastener generally begins when a customer submits
specifications for the fastener to the Company. The design team then develops a
computer-generated or physical model of the fastener based on the specifications
and may work with the Company's research and development (R&D) group, which
includes skilled tool and die makers and a machine development group, to produce
a prototype of the product. Reliance on the Company's R&D personnel at this
stage of the development process allows the Company to thoroughly test a new
design and its requisite manufacturing process without interrupting the
manufacture of existing products at the Company's facilities. Concurrent with
the design and testing of a prototype, the design team also develops a plan for
manufacturing the fastener in the most cost-effective manner and undertakes the
steps necessary to implement that plan.
PATENTS
The Company currently holds a number of U.S. and international patents,
covering a variety of products and processes. Although the Company believes
patent protection to be valuable in certain circumstances, management does not
believe that the termination, expiration or infringement of one or more of the
Company's patents would have a material adverse effect on the business or
prospects of the Company.
The Company has not been involved in patent infringement litigation, and the
Company believes that its processes and products do not infringe on the
intellectual property rights of others; however, there can be no assurance that
an infringement claim will not be asserted against the Company in the future.
The Company has from time to time asserted infringement claims by notice to
third parties. Such claims, however, have been settled by the Company and have
not resulted in litigation.
MANUFACTURING AND RAW MATERIALS
Each of the Company's fasteners is manufactured using one of three general
methods of production: stamping, machining or forging. In each case, the
production process begins with the purchase of raw materials: sheet metal in the
case of stamping, bars in the case of machining and high grade wire in the case
of forging. The fastener is then formed using the applicable processes.
Subsequent steps in the production process include tapping, crimping, heat
treating, plating, coating, assembly and final inspection.
The Company manufactures fasteners for its commercial aircraft and defense
customers based on the customers' orders and specifications and, except for
certain Recoil products, the Company generally does
30
<PAGE>
not produce fasteners for its own inventory. The Company has the expertise in
complex manufacturing processes necessary to produce products in multiple, short
runs, which are often requested by its customers. See "--Key Competitive
Strengths--Rapid Customer Response."
The Company purchases raw materials, which include the various metals,
composites and finishes used in production, from over twenty different
suppliers. The Company believes that these raw materials would be available at
competitive prices from various other suppliers as well. See "Risk Factors--
Availability and Cost of Raw Materials" for a discussion of the risks related to
the Company's supply of raw materials.
SALES AND MARKETING
The Company's sales force consists of approximately 24 salespeople located
throughout the world and 31 independent sales agents who work with the Company
on a commission basis. The sales force sells products directly to OEMs and
subcontractors and to a global network of 35 independent distributors, who, in
turn, sell to OEMs, subcontractors and other customers. Often, the OEMs will
determine whether the Company sells a product directly to the OEM or through an
independent distributor.
Each of the Company's four business units independently conducts sales and
marketing efforts. In certain cases, however, the business units collaborate in
cross-marketing efforts and, in some geographic regions, may use the same sales
representative or agent. Each business unit's sales force and its respective
officers are responsible for obtaining new customers and maintaining
relationships with existing customers.
EMPLOYEES
As of December 31, 1996, the Company employed 1,111 employees. Approximately
73% of these employees are engaged in manufacturing, 22% are engaged in
management, sales, marketing and general administration and 5% are engaged in
engineering and product development. None of the Company's employees is
represented by a union, and management considers its employee relations to be
good.
Each of the Company's employees (other than those in the Recoil business
unit) is eligible for an annual bonus based on the return on capital employed of
the particular business unit in which the employee works.
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<PAGE>
PROPERTIES
As of December 31, 1996, the Company had eight principal facilities,
consisting of an aggregate of approximately 277,900 square feet of space. The
following table describes the principal facilities and indicates the location,
function, approximate size and ownership of each:
<TABLE>
<CAPTION>
APPROX.
SQUARE
LOCATION FUNCTION FOOTAGE OWNERSHIP
- ------------------------------ --------------------------------- --------- -------------------------
<S> <C> <C> <C>
Fullerton, CA................. The Company and Kaynar Division 200,000 Leased (expires
headquarters: October 31, 1999)
Administration, product
development, engineering,
manufacturing and distribution
Placentia, CA................. Microdot Division headquarters: 40,000 Leased (expires
Administration, product September 30, 2001)
development, engineering,
manufacturing and distribution
Oakleigh, VIC, Australia...... Recoil Pty headquarters: 24,000 Leased (expires
Administration, product August 1, 2000)
development, engineering,
manufacturing and distribution
Nemesuamos, Hungary........... K.T.I. Femipari KFT: 6,200 Owned
Manufacturing
Carmel, IN.................... Recoil (U.S.): 4,300 Leased (expires
Sales and marketing of Recoil December 31, 1998)
products
Wolverhampton, U.K............ Recoil (Europe) Ltd.: 1,700 Leased (expires
Sales and marketing of Recoil December 25, 2001)
products
Lutterworth, U.K.............. Kaynar Technologies Ltd. 1,000 Leased (expires
headquarters: January 2, 2002)
Kaynar and K-Fast sales office
Aalst, Belgium................ Recoil Marketing BVBA: 700 Leased (expires
Sales and marketing of Recoil April 20, 2003)
products
</TABLE>
The Company currently anticipates that its 6,200 square foot manufacturing
facility in Nemesuamos, Hungary will be completed and operational by the end of
the first quarter of 1997. The Company purchased the property on which the
facility is being built in July 1996. When completed, the Hungarian facility
will be responsible for certain machining and forging operations on a limited
number of Kaynar and Microdot products. These products will be transported to
the Company's U.S. facilities for final fabrication.
While the Company believes that its facilities are adequate to support its
operations for the foreseeable future, the Company regularly reviews its need
for additional facilities and could, in the future, lease or purchase one or
more additional facilities or seek to expand its existing facilities.
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<PAGE>
LEGAL PROCEEDINGS
During the ordinary course of business, the Company, from time to time, is
threatened with, or becomes a party to, legal actions and other proceedings.
Management is of the opinion that the outcome of currently known legal actions
and proceedings to which it is a party will not, singly or in the aggregate,
have a material adverse effect on the Company.
COMPETITION
The Company competes with a number of producers of aerospace fasteners and
fastening systems, including three publicly-held companies, SPS Technologies
Inc. ("SPS"), the Huck International Division of the Thiokol Corporation
("Thiokol") and The Fairchild Corporation ("Fairchild"), all of which have
greater financial resources than the Company. SPS manufactures high-strength
wrenchable nuts, gang channels, plate nuts and other products for certain of the
same customers as the Company, including Boeing, Pratt & Whitney and GE. Thiokol
produces fasteners and fastening systems that differ substantially from the
Company's products in design, but nevertheless serve comparable functions in
airframe and engine construction. Fairchild produces threaded inserts and studs
that compete with the Microdot product lines, as well as various nuts used by
certain of the Company's customers, including GE. On January 27, 1997, Fairchild
announced that it had signed a letter of intent with Simmonds, a French
corporation, which produces fasteners that compete with certain Kaynar products,
particularly metric nuts and gang channels sold to European airframe and engine
OEMs. Under the terms of the letter of intent, Fairchild would acquire an 84.2%
ownership interest in Simmonds. The Company also competes with several smaller,
privately-owned companies, which generally have lower sales volumes than the
Company.
The Company believes that competition for sales of fasteners and fastener
systems to the commercial aircraft and defense industries is based on product
design and quality, turnaround time and responsiveness to customer
specifications, product availability and pricing. The Company believes that it
competes favorably with respect to each of these factors.
HeliCoil, a unit of Black & Decker Corp., is Recoil's primary competitor in
the industrial markets for threaded inserts. The Company believes that
competition for sales of threaded insets and thread repair kits to the markets
served by Recoil is based on turnaround time and responsiveness to customer
specifications, product availability and pricing. The Company believes that it
competes favorably with respect to each of these factors.
ENVIRONMENTAL MATTERS
The Company's operations are subject to federal, state and local
environmental laws and regulation by various governmental agencies. Among other
matters, these regulatory authorities impose requirements that regulate the
generation, emission, discharge, management, transportation and disposal of
hazardous materials, pollutants and contaminants, govern public and private
response actions to hazardous or regulated substances that may be or have been
released into the environment, and require the Company to obtain and maintain
licenses and permits in connection with its operations. This extensive
regulatory framework imposes significant compliance burdens and risks on the
Company. Although management believes that the Company's operations and its
facilities are in material compliance with such laws and regulations, there can
be no assurance that future changes in such laws, regulations or interpretations
thereof or the nature of the Company's operations will not require the Company
to make significant additional capital expenditures to ensure compliance in the
future.
The Company anticipates that during the period from 1997 through 1998 it
will incur a one-time capital expenditure of between $1 million and $2 million
to reduce its reliance on degreasing operations that use perchloroethylene by
switching to aqueous-based solvents whenever possible. Although these new
operations will significantly reduce the Company's need to use perchloroethylene
as a degreasing agent, the Company's principal reason for undertaking this
expenditure is to increase manufacturing efficiency.
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<PAGE>
Although the Company has not been notified by any environmental authority
that its current degreasing operations are in violation of any applicable law or
regulation, perchloroethylene has been detected in the soil beneath the
Company's Fullerton, California facility. Environmental consultants retained by
the Company have determined that this was not caused by existing degreasing
operations. The Company anticipates that if remediation of the perchloroethylene
at this site is required, it could be accomplished at a cost of approximately
$200,000 over the course of two years. In connection with the AFSG acquisition
in January 1994, the Company established reserves that management believes are
sufficient to cover this possible remediation.
The Company is required to maintain air quality permits for the operation of
several of its plating lines. The permit required to run its cadmium-plating
system currently includes a maximum annual usage restriction that is
significantly below the Company's actual 1996 usage. In 1996, however, the
Company obtained a variance from the applicable environmental control authority
that permitted the Company to exceed the usage restriction. In 1997, the Company
intends to install a new automated cadmium-plating system that includes improved
emissions control features, which should result in removal of the usage
restriction. If the restriction is not removed prior to the installation of the
automated plating system, the Company expects that it will again be granted a
usage variance. There can be no assurance, however, that a usage variance will
be granted or that the failure to obtain a usage variance will not have a
material adverse effect on the Company.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the directors and
executive officers of the Company. Each director holds office until the next
annual meeting of stockholders, or until his successor has been elected and
qualified. Officers are appointed by the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE(*) PRINCIPAL POSITIONS WITH THE COMPANY
- ------------------------------------ ----------- --------------------------------------------------------------------
<S> <C> <C>
Jordan A. Law....................... 54 Chairman of the Board of Directors, President and Chief Executive
Officer
David A. Werner..................... 44 Executive Vice President, Secretary and Director
Robert L. Beers..................... 50 Senior Vice President, Marketing and Business Development
LeRoy A. Dack....................... 51 Division President, Kaynar
Joseph M. Varholick................. 45 Division President, Microdot
Kenneth D. Jones.................... 52 Group Chief Executive Officer, Recoil
Imre Berecz......................... 59 Vice President, Product Research and Development, and Managing
Director, K.T.I. Femipari KFT
Joseph F. Blomberg.................. 58 Director of Human Resources
Norman A. Barkeley.................. 66 Director
Burton J. Kloster, Jr............... 65 Director
Richard P. Strubel.................. 57 Director
</TABLE>
- ------------------------
* As of December 31, 1996.
JORDAN A. LAW has been Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since October 1993. From July 1991 to
January 1994, Mr. Law served as President of AFSG.
DAVID A. WERNER has been Executive Vice President of the Company since
December 1996 and Secretary and a Director of the Company since October 1993.
From October 1993 to December 1996, Mr. Werner served as Vice President and
Treasurer of the Company. From July 1990 to January 1994, Mr. Werner was Vice
President and Chief Financial Officer of Old Microdot. Mr. Werner is also a
director of Lumber Yard Supply, a privately-held corporation. Mr. Werner is a
certified public accountant.
ROBERT L. BEERS has been Senior Vice President, Marketing and Business
Development, of the Company since December 1996. From January 1994 to December
1996, Mr. Beers served as Vice President, Sales and Marketing, of the Company.
From June 1991 to January 1994, Mr. Beers was Vice President, Sales and
Marketing, of AFSG.
LEROY A. DACK has been President of the Company's Kaynar business unit since
December 1996. From January 1994 to December 1996, Mr. Dack served as Vice
President and General Manager of the Kaynar business unit. From May 1991 to
January 1994, Mr. Dack was Vice President of the Kaynar division of Old
Microdot.
JOSEPH M. VARHOLICK has been President of the Company's Microdot operating
unit since December 1996. From January 1994 to December 1996, Mr. Varholick
served as Vice President and General Manager of the Microdot business unit. From
September 1993 to January 1994, Mr. Varholick was Vice President and General
Manager of the Microdot Inserts division of Old Microdot. From May 1992 to
September 1993, Mr. Varholick was Managing Director of Microdot Aerospace
Limited (U.K.), a subsidiary of Old Microdot. Prior to May 1992, Mr. Varholick
was the Director of Sales of the Kaynar division of Old Microdot.
KENNETH D. JONES has been Group Chief Executive Officer of the Company's
Recoil business unit since August 1996. From August 1994 to August 1996, Mr.
Jones was the Group Chief Executive Officer of
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<PAGE>
Recoil Pty Ltd, the entity from which the Company purchased the Recoil business
unit. Prior to August 1994, Mr. Jones served as Chief Executive Officer of
Polycure Pty. Ltd., a manufacturer of specialty, high technology coatings.
IMRE BERECZ has been Vice President, Product Research and Development, and
Managing Director, K.T.I. Femipari KFT, since December 1996. From January 1994
to December 1996, Mr. Berecz was the Company's Vice President, Research and
Development. From 1983 to January 1994, Mr. Berecz served as Vice President,
Engineering of AFSG.
JOSEPH F. BLOMBERG has been Director of Human Resources of the Company since
January 1994. From June 1984 to January 1994, Mr. Blomberg served as Director of
Human Resources of AFSG.
NORMAN A. BARKELEY has been a Director of the Company since March 1997. Mr.
Barkeley has been chairman of Ducommun Incorporated, an aerospace equipment
manufacturer ("Ducommun"), since July 1988. Mr. Barkeley served as Chief
Executive Officer of Ducommun from July 1988 to December 1996 and President of
Ducommun from July 1988 to December 1995. Mr. Barkeley is also a director of
Dames and Moore Inc., an engineering and consulting firm, Golden Systems, Inc.,
an electrical components manufacturer, and RHR International Co., a
privately-held management consulting firm.
BURTON J. KLOSTER, JR. has been a Director of the Company since March 1997.
Mr. Kloster has been retired since September 1995. Prior to his retirement, Mr.
Kloster had served as a Director of GECC since September 1989, Senior Vice
President of GECC since October 1984 and Vice President, General Counsel and
Secretary of GECC since March 1976. Pursuant to the New Stockholders Agreement,
GECC designated Mr. Kloster as an individual to be nominated to the Board of
Directors by the Company.
RICHARD P. STRUBEL has been a Director of the Company since March 1997. Mr.
Strubel has been Managing Director of Tandem Partners, Inc., a management
services firm, since June 1990. From January 1984 to October 1994, Mr. Strubel
served as President and Chief Executive Officer of Old Microdot. Mr. Strubel is
a director of Children's Memorial Medical Center and Children's Memorial
Hospital, both of which are located in Chicago, and a trustee of the University
of Chicago. Mr. Strubel also is a trustee of 35 mutual funds for which Goldman,
Sachs & Co. serves as investment adviser and 16 mutual funds for which The
Northern Trust Company serves as investment adviser. Pursuant to the New
Stockholders Agreement, GECC designated Mr. Strubel as an individual to be
nominated to the Board of Directors by the Company.
As discussed above, each of Messrs. Law, Werner, Beers, Dack, Varholick and
Strubel served as an officer or key employee of Old Microdot. In June 1993, Old
Microdot filed a petition under Chapter 11 of the federal bankruptcy laws. See
"The Company--The Predecessor Company."
DIRECTORS COMPENSATION
Prior to January 31, 1997, members of the Company's Board of Directors did
not receive any compensation for their services as directors. Commencing in
March 1997, however, non-employee directors will be paid $10,000 per year plus
$1,000 per meeting for attending meetings of the Board of Directors or meetings
of any committee thereof not immediately preceding or following a meeting of the
full Board. Non-employee directors may also participate in the Company's 1997
Stock Incentive Plan. See "--Stock Incentive Plan--Non-Employee Director
Options." Except as set forth below in "--Executive Compensation," directors who
are employees of the Company will not be paid for their services as directors.
All directors, however, are reimbursed for certain expenses in connection with
attendance at Board of Directors and committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a Compensation
Committee. As long as the outstanding Series C Preferred Stock represents 40% or
more of the Fully Diluted Shares, each of these committees will include a
director that was designated by the holder of the Series C Preferred Stock for
nomination to the Board of Directors. As long as the outstanding Series C
Preferred Stock represents
36
<PAGE>
25% or more (but less than 40% of the Fully Diluted Shares, each of these
committees will include one director that was designated by the holder of the
Series C Preferred Stock for nomination to the Board of Directors. See
"Description of Capital Stock--The New Stockholders Agreement."
The Audit Committee reviews, acts on and reports to the Board of Directors
with respect to various auditing and accounting matters, including the selection
of the Company's independent auditors, the scope of annual audits, fees to be
paid to auditors, the performance of the auditors and the accounting practices
of the Company. The Audit Committee currently consists of Messrs. Kloster and
Strubel.
The Compensation Committee, which consists of Messrs. Strubel and Barkeley,
determines the salaries and incentive compensation of the Company's officers and
provides recommendations for the salaries and incentive compensation of the
other employees of, and any consultants to, the Company. The Compensation
Committee also administers the Company's incentive compensation, stock and
benefit plans.
The Bylaws of the Company provide that the Board of Directors may also
establish other committees from time to time.
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation awarded to,
earned by, or paid to the Chief Executive Officer of the Company and each of the
four most highly compensated executive officers of the Company (other than the
Chief Executive Officer) whose total annual salary and bonus for the year ended
December 31, 1996 was in excess of $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- ------------------------------------------------------------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Jordan A. Law .................................................... 1996 $ 175,000 $ 181,000 --
Chief Executive Officer 1995 164,000 123,000 --
1994 156,000 81,000 --
David A. Werner .................................................. 1996 150,000 144,000 --
Executive Vice President 1995 139,000 98,000 --
1994 132,000 66,000 --
Robert L. Beers .................................................. 1996 124,000 77,000 $ 4,769(1)
Senior Vice President, Marketing and 1995 118,000 52,000 --
Business Development 1994 112,000 36,000 --
LeRoy A. Dack .................................................... 1996 122,000 80,000 --
Division President, Kaynar 1995 118,000 53,000 --
1994 112,000 42,000 --
Joseph M. Varholick .............................................. 1996 110,000 67,000 --
Division President, Microdot 1995 101,000 39,000 --
1994 96,000 23,000 3,504(2)
</TABLE>
- ------------------------
(1) This amount compensated Mr. Beers for vacation time not taken.
(2) This payment reimbursed Mr. Varholick for certain taxes incurred as a result
of an overseas assignment undertaken at the request of the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In March 1997, the Company entered into employment agreements with Messrs.
Law, Werner, Dack, Beers, Varholick and Berecz. The agreements provide for
annual base salaries of $190,000, $170,000,
37
<PAGE>
$137,000, $136,000, $125,000 and $124,000, respectively, which are subject to
discretionary increases and annual review. The duration of each agreement is one
year (two years for Messrs. Law and Werner); however, each agreement contains an
automatic renewal provision that takes effect every six months unless notice
that the agreement will not be renewed is given at least 30 days prior to a
renewal date. The agreements provide for participation in all annual bonus,
incentive, savings and retirement and benefit plans offered generally to Company
employees. If the Company terminates an agreement other than for cause or as a
result of death or disability, the Company will pay a lump sum equal to the
employee's annual base salary (two times annual base salary in the case of
Messrs. Law and Werner). If a change in control of the Company occurs within two
years, and either the Company terminates an agreement other than for cause or an
employee terminates his agreement for good reason, the Company will pay an
amount equal to the sum (or, for Messrs. Law and Werner, twice the sum) of (i)
the highest annual base salary paid to the employee during the three most recent
calendar years ending prior to the year the change in control occurs and (ii)
the amount of the highest bonus or bonuses paid to the employee for any calendar
year ending prior to the year the change in control occurs.
In August 1996, the Company also entered into an employment agreement with
Mr. Jones, which provides for a base salary of $184,000 (Australian dollars) per
year, a contribution to a superannuation fund equaling 10% of base salary and
certain fringe benefits. Mr. Jones will be entitled to a bonus equal to 1% of
base salary for every 1% increase in Recoil's annual net profit before
depreciation, interest and taxes from the previous twelve month period. Although
the agreement is not limited in duration, either party may terminate the
agreement by giving four months written notice; however, should his employment
be terminated within the first three years after the commencement of the
agreement, Mr. Jones will be entitled to an additional special payment equal to
six months of his total compensation package.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, Messrs. Law and Werner were the only executive officers of the
Company who participated in deliberations of the Company's Board of Directors
concerning executive compensation. The Compensation Committee of the Board of
Directors was not formed until March 1997. See "--Committees of the Board of
Directors."
STOCK INCENTIVE PLAN
In March 1997 the Company and its stockholders adopted the Company's 1997
Stock Incentive Plan (the "Plan"). The Plan provides an additional means to
attract, motivate, retain and reward key employees (including executive
officers), as well as outside consultants and advisors, of the Company and its
subsidiaries and to attract, motivate, and retain experienced and knowledgeable
independent directors.
SHARES THAT MAY BE ISSUED UNDER THE PLAN. A maximum of 850,000 shares of
Common Stock, or approximately 9.9% of the issued and outstanding shares of
Common Stock (on a fully diluted basis), has been reserved for issuance as
grants and awards under the Plan. The maximum number of shares that may be
subject to options and stock appreciation rights ("SARs") granted to any
participant in the Plan during any calendar year will not exceed 75,000. The
number and kind of shares available under the Plan are subject to adjustment in
the event of any reclassification, recapitalization, stock split (including a
stock split in the form of a stock dividend), extraordinary dividend or other
distribution with respect to the Common Stock, reverse stock split,
reorganization, merger, combination, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Stock or other securities of the
Company, or there shall occur any similar corporate transaction or event with
respect to the Common Stock or a sale of substantially all assets of the
Company.
ADMINISTRATION AND ELIGIBILITY. The Plan will be administered by the
Compensation Committee, each member of which must be an outside director as
defined in Section 162(m) of the Internal Revenue Code (the "Code"). The Plan
empowers the Compensation Committee, among other things, to interpret the Plan,
to make all determinations deemed necessary or advisable for the administration
of the Plan and to award to officers and other employees of the Company as well
as other persons, such as significant
38
<PAGE>
consultants and advisors, selected by the Compensation Committee (collectively,
"Eligible Persons"), options (including incentive stock options ("ISOs")) as
defined in the Code, SARs, shares of restricted stock, performance shares, other
awards valued by reference to Common Stock and such factors as the Compensation
Committee deems relevant, and certain Cash-Based Awards (as defined in the
Plan). The various types of awards under the Plan are collectively referred to
as "Awards." It is expected that after the consummation of the Offering there
will be approximately 50 officers and other employees eligible to participate in
the Plan.
TRANSFERABILITY. Generally speaking, Awards are not transferable other than
by will or the laws of descent and distribution, are exercisable only by the
participant and may be paid only to the participant or the participant's
beneficiary or representatives. However, the Compensation Committee may
establish conditions and procedures under which exercise by and transfers and
payments to certain third parties are permitted, to the extent permitted by law.
OPTIONS. An option is the right to purchase shares of Common Stock at a
future date at a specified price. The option price is generally one hundred
percent of the closing price for a share of Common Stock as reported on any
national securities exchange ("fair market value") on the date of grant, but may
be a lesser amount, in the case of nonqualified stock options, if authorized by
the Compensation Committee.
An option may be granted as an ISO or a nonqualified stock option. An ISO
may not be granted to a person who, at the time the ISO is granted, owns more
than 10% of the total combined voting power of all classes of stock of the
Company and its subsidiaries unless the option price is at least 110% of the
fair market value of shares of Common Stock subject to the option and such
option by its terms is not exercisable after expiration of five years from the
date such option is granted. The aggregate fair market value of shares of Common
Stock (determined at the time the option is granted) for which ISOs may be first
exercisable by an option holder during any calendar year under the Plan or any
other plan of the Company or its subsidiaries may not exceed $100,000. A
nonqualified stock option is not subject to any of these limitations.
SARS. The Plan authorizes the Compensation Committee to grant SARs
independent of any other Award or concurrently (and in tandem) with the grant of
options. An SAR granted in tandem with an option is only exercisable when and to
the extent that the related option is exercisable. An SAR entitles the holder to
receive upon exercise the excess of the fair market value of a specified number
of shares of Common Stock at the time of exercise over the option price. This
amount may be paid in Common Stock (valued at its fair market value on the date
of exercise), cash or a combination thereof, as the Compensation Committee may
determine.
PERFORMANCE SHARE AWARDS. The Compensation Committee may, in its
discretion, grant Performance Share Awards to Eligible Persons based upon such
factors as the Compensation Committee deems relevant in light of the specific
type and terms of the Award. The amount of cash or shares or other property that
may be deliverable pursuant to these Awards will be based upon the degree of
attainment, over a specified period of not more than ten years (a "performance
cycle") as may be established by the Compensation Committee, of such measures of
the performance of the Company (or any part thereof) or the participant as may
be established by the Compensation Committee. The Compensation Committee may
provide for full or partial credit, prior to completion of a performance cycle
or the attainment of the performance achievement specified in the Award, in the
event of the participant's death, retirement, or disability, a Change in Control
Event (as defined in the Plan) or in such other circumstances as the
Compensation Committee may determine.
SPECIAL PERFORMANCE-BASED AWARDS. In addition to Awards granted under other
provisions of the Plan, performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), which depend on the achievement
of pre-established performance goals, may be granted under the Plan. The
specific performance goals will be selected by the Compensation Committee in its
sole discretion and the specific targets will be pre-established so that their
attainment is substantially uncertain at the time of establishment. The
permitted performance goals under the Plan may include earnings per
39
<PAGE>
share, return on equity, cash flow and total stockholder return. However, the
applicable performance measurement period may not be less than one nor more than
ten years.
40
<PAGE>
The eligible class of persons for Performance-Based Awards consists of the
executive officers of the Company. The maximum number of shares of Common Stock
that may be delivered as Performance-Based Awards to any participant in any
calendar year shall not exceed 75,000 shares. Furthermore, the maximum amount of
compensation to be paid to any participant in respect of any Cash-Based Awards
that are granted in any calendar year may not exceed $200,000. Before any
Performance-Based Award is paid, the Committee must certify that the material
terms of the Performance-Based Award were satisfied. The Committee will have
discretion to determine the restrictions or other limitations of the individual
Awards.
STOCK BONUSES. The Compensation Committee may grant a stock bonus to any
Eligible Person to reward exceptional or special services, contributions or
achievements in the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the Compensation
Committee. The number of shares so awarded shall be determined by the
Compensation Committee and may be granted independently or in lieu of a cash
bonus.
TERM AND EXERCISE PERIOD OF AWARDS. The Plan provides that awards may be
granted for such terms as the Compensation Committee may determine but options
to acquire Common Stock may not have terms greater than ten years after the date
of the Award. The Plan also generally imposes a six-month minimum vesting period
on Awards. The Compensation Committee will set forth in each Award the effect of
termination of employment upon the rights and benefits conferred and may make
distinctions based on the cause of termination. In the event of termination
other than for cause, the Compensation Committee may, in its discretion,
increase the portion of an Award otherwise available or extend the exercise
period of such Award. For non-employee directors, if the director's service with
the Company terminates by reason of death or disability, his or her options
shall become immediately exercisable and may be exercised for a period of two
years after the date of such termination or until the options expire, whichever
occurs first. If a non-employee director is terminated for any other reason, his
or her exercisable options will expire at the earlier of six months or the
expiration of the stated term and options not exercisable will be terminated.
The Committee has the authority to accelerate the exercisability of options or
(within the maximum ten-year term) extend the exercisability periods.
TERMINATION, AMENDMENT AND ADJUSTMENT. The Plan may be terminated by the
Compensation Committee or by the Board of Directors at any time. In addition,
the Compensation Committee or the Board may amend the Plan from time to time,
without the authorization or approval of the Company's stockholders, unless that
approval is required by law, agreement or the rules of any exchange upon which
the stock of the Company is listed. No Award may be granted under the Plan more
than ten years after the effective date of the Plan, although Awards previously
granted may thereafter be amended consistent with the terms of the Plan.
Upon the occurrence of a Change in Control Event, in addition to
acceleration of vesting, an appropriate adjustment to the number and type of
shares or other securities or property subject to an Award and the price thereof
may be made in order to prevent dilution or enlargement of rights under Awards.
Individual awards may be amended by the Compensation Committee in any manner
consistent with the Plan, including amendments that effectively reprice options
without changes to other terms. Amendments that adversely affect the holder of
an Award, however, are subject to his or her consent. The Plan is not exclusive
and does not limit the authority of the Board of Directors or the Compensation
Committee to grant other awards, in stock or cash, or to authorize other
compensation, under any other plan or authority.
NON-EMPLOYEE DIRECTOR OPTIONS. The Plan provides for automatic initial and
subsequent annual grants of non-qualified stock options, with five-year terms,
to non-employee directors. Each person who becomes a non-employee director will
receive an initial grant of options to purchase 1,000 shares of Common Stock.
Under the subsequent automatic grant, each non-employee director then in office
will be granted options to purchase 500 shares each January 31. Each
non-employee director option will vest at the rate of 25% per year commencing
one year after the initial award date and each of the next three years
40
<PAGE>
thereof. Upon the occurrence of a Change in Control Event, each non-employee
director option will become immediately exercisable in full, provided that no
option will be accelerated to a date prior to six months after its grant date.
To the extent any non-employee director option is not exercised prior to (i)
dissolution of the Company or (ii) a merger or other corporate event that the
Company does not survive, and no provision is made for the assumption,
conversion, substitution or exchange of such option, such option will terminate
upon the occurrence of the Change in Control Event.
INITIAL GRANTS OF OPTIONS. The Company anticipates granting certain options
or shares under the Plan within three-to-six months following the consummation
of the Offering. Options to purchase approximately 100,000 shares are
anticipated to be granted to all executive officers and employees as a group.
These options are anticipated to have a term of five years and to vest in equal
annual installments over four years. It is anticipated that the options will
have an exercise price at least equal to the then prevailing market price per
share.
CERTAIN TRANSACTIONS
FINANCING ARRANGEMENTS
The Company and Operating Company have entered into the following financing
arrangements with GECC:
FIXED RATE LOANS
TERM LOAN AGREEMENT. In January 1994, in connection with the capitalization
of the Company, the Company and GECC entered into a Term Loan Agreement (the
"Term Loan Agreement"), pursuant to which GECC loaned $4.8 million to the
Company, which is due and payable on January 3, 1999 and secured by the stock of
Operating Company. Interest on this term loan, which is payable quarterly and
may be added to the original principal, accrued at the rate of 9.5% for the
period from January 3, 1994 to December 31, 1995 and, pursuant to the terms of
the Term Loan Agreement, will accrue at the rate of 11.5% from January 1, 1996
until the loan is paid in full. As of December 31, 1996, approximately $6.5
million in total principal and interest was outstanding under this term loan.
Interest expense on the loan was approximately $476,000, $525,000, and $712,000
for 1994, 1995 and 1996 respectively.
PAYMENT-IN-KIND (PIK) DIVIDEND NOTE AGREEMENT. In lieu of quarterly cash
dividends on the Series A and Series B Preferred Stock, the Company has issued
PIK Dividend Notes to GECC. As of December 31, 1996, principal and interest on
twelve PIK Dividend Notes for each such series of Preferred Stock were
outstanding in the aggregate amounts of $84,000 for the Series A Preferred Stock
and $247,000 for the Series B Preferred Stock. Interest on the PIK Dividend
Notes, which is payable quarterly and may be added to the original principal of
a Note, accrued at the rate of 9.5% for the period from January 3, 1994 to
December 31, 1995 and will accrue at the rate of 11.5% from January 1, 1996
until each PIK Dividend Note is paid in full. Total interest expense on all PIK
Dividend Notes was approximately $5,000, $12,000, and $26,000 for 1994, 1995 and
1996, respectively.
VARIABLE RATE LOANS
CREDIT AGREEMENT. In January 1994, Operating Company entered into a
separate Credit Agreement (the "Credit Agreement") with GECC, which contains
both a term loan provision and the Revolver. The term loan under the Credit
Agreement, which is secured by substantially all of the Company's assets, was
initially issued in the amount of $15.8 million for use in connection with the
AFSG acquisition. Amendments to the Credit Agreement in December 1994, August
1995, August 1996 and December 1996 increased that amount to $28.2 million, the
proceeds of which have been used for working capital purposes and capital
expenditures. Quarterly principal repayments commenced April 1, 1995 and are
payable through the maturity date, January 3, 1999. Interest is payable monthly
at a rate equal to the prime rate plus 1.5% (which was 9.75% as of December 31,
1996). Interest expense on the loan was approximately $1.4 million, $1.9 million
and $2.0 million, for 1994, 1995 and 1996, respectively.
41
<PAGE>
TERM LOAN AGREEMENT. In August 1996, GECC loaned an additional $4.0 million
to the Company under the Term Loan Agreement for the Recoil acquisition.
Interest on this loan is payable monthly at a rate equal to the prime rate plus
1.5% (which was 9.75% as of December 31, 1996). As of December 31, 1996, $4.0
million in total principal was outstanding under this loan. Interest expense on
the loan was approximately $154,000 for 1996.
RECOIL TERM LOAN AGREEMENT. Recoil Pty, an Australian subsidiary of the
Company that was formed to acquire the Recoil business unit, entered a separate
term loan agreement with GECC in August 1996 to finance the acquisition (the
"Recoil Term Loan"). At December 31, 1996, the outstanding principal under the
Recoil Term Loan, which is due and payable on January 3, 1999, was $6.0 million.
Interest on the Recoil Term Loan is payable monthly at a rate equal to the prime
rate plus 1.5% (which was 9.75% as of December 31, 1996). Interest expense on
the Recoil Term Loan for 1996 was approximately $231,000.
REVOLVING LINE-OF-CREDIT
The Revolver is a $15.0 million revolving credit facility, the availability
of which is limited by the lesser of a specified portion of qualified accounts
receivable and $15.0 million. Interest is payable monthly, beginning at the date
of advance, at a rate equal to the prime rate plus 1.5% (which was 9.75% as of
December 31, 1996). The Revolver expires on January 3, 1999. A principal balance
of approximately $746,000 was outstanding under the Revolver as of December 31,
1996, with availability of approximately $10 million as of such date. The
average amount outstanding under the Revolver was approximately $5.1 million,
$4.4 million and $6.9 million in 1994, 1995 and 1996, respectively. Interest
expense on the Revolver was approximately $447,000, $462,000, $682,000 for 1994,
1995 and 1996, respectively.
OTHER ARRANGEMENTS
In the ordinary course of business, the Company supplies fasteners, inserts
and other products to the Aircraft Engines Division of GE. GE is the indirect
parent company of GECC. The Company made direct sales of approximately $8.0
million, $8.8 million and $11.4 million to the GE Aircraft Engines Division in
1994, 1995 and 1996, respectively, representing approximately 14.6%, 12.7% and
11.5% of the Company's net sales in such years, respectively. All of these sales
were negotiated at arm's length, based on competitive bids.
42
<PAGE>
PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock and Common Stock equivalents after
giving effect to the Reorganization, and as adjusted to reflect the sale of the
Common Stock offered hereby, by (i) each person or entity known to the Company
to own beneficially more than 5% of the Common Stock or Common Stock equivalents
following the Reorganization, (ii) each of the Company's directors and executive
officers, (iii) the Selling Stockholder and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
OR COMMON STOCK
EQUIVALENTS SHARES OF COMMON STOCK
BENEFICIALLY OWNED OR COMMON STOCK
AFTER THE EQUIVALENTS
REORGANIZATION, BUT BENEFICIALLY OWNED
PRIOR TO THE AFTER THE
OFFERING(2) OFFERING(2)(3)
NAME AND ADDRESS OF ----------------------- -----------------------
BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------------------------- ---------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
General Electric Capital Corporation(4)................... 5,406,000 79.5% 200,000 5,206,000 60.5%
201 High Ridge Road
Stamford, CT 06927
Jordan A. Law............................................. 369,444 5.4% -- 369,444 4.3%
David A. Werner........................................... 341,564 5.0% -- 341,564 4.0%
Robert L. Beers........................................... 229,976 3.4% -- 229,976 2.7%
LeRoy A. Dack............................................. 229,976 3.4% -- 229,976 2.7%
Berecz Family Trust(5).................................... 139,400 2.1% -- 139,400 1.6%
Joseph M. Varholick....................................... 55,760 * -- 55,760 *
Blomberg Family Trust(6).................................. 27,880 * -- 27,880 *
All directors and executive officers as a group (11
persons)................................................ 1,394,000 20.5% -- 1,394,000 16.2%
</TABLE>
- ------------------------
* Less than 1%.
(1) The address of each person other than GECC is 800 S. State College Blvd.,
Fullerton, California 92831.
(2) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as
to which the individual has sole or shared voting power or investment power
and also any shares which the individual has the right to acquire within 60
days after , 1997. The inclusion herein of such shares, however,
does not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect to all
shares of capital stock listed as owned by such person or entity.
(3) Assumes that the Underwriters' over-allotment option is not exercised.
(4) Includes 5,206,000 shares of Series C Preferred Stock, which represent all
issued and outstanding shares of Series C Preferred Stock. The Series C
Preferred Stock is convertible at any time into Common Stock at a one-to-one
conversion rate, subject to adjustment in certain circumstances. See
"Description of Capital Stock--Series C Preferred Stock."
(5) Imre Berecz, the Company's Vice President, Product Research and Development,
and Managing Director, K.T.I. Femipari KFT, is the trustee of the Berecz
Family Trust.
(6) Joseph F. Blomberg, the Company's Director of Human Resources, is the
trustee of the Blomberg Family Trust.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of December 31, 1996, there were (i) 20,500 shares of Common Stock
outstanding, held of record by seven holders, (ii) 20,094 shares of Series A
Preferred Stock outstanding, held of record by one holder, (iii) 59,406 shares
of Series B Preferred Stock outstanding, held of record by one holder and (iv)
no options or warrants to purchase shares of Common Stock outstanding. After the
Reorganization, the Company's authorized capital stock will consist of
20,000,000 shares of Common Stock and 10,000,000 shares of Series C Preferred
Stock. As a result of the Reorganization, 1,594,000 shares of Common Stock, held
of record by eight stockholders, 5,206,000 shares of Series C Preferred Stock,
held of record by one stockholder and no options or warrants to purchase Common
Stock will be outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See
"Dividends." In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and satisfaction of preferential rights
of any outstanding preferred stock. Common Stock has no preemptive or conversion
rights or other subscription rights. The outstanding shares of Common Stock are,
and the shares to be issued upon completion of the Offering will be, fully paid
and non-assessable.
SERIES C PREFERRED STOCK
LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, the holders of the Series C Preferred Stock will be
entitled to receive out of the assets of the Company available for distribution
to stockholders an amount equal to $0.22 per share, plus any accrued and unpaid
dividends thereon, before any distribution is made to the holders of Common
Stock.
CONVERTIBILITY. Each share of Series C Preferred Stock is convertible at
any time into one share of Common Stock (the "Conversion Rate"), with no payment
due from the Selling Stockholder to the Company. Any shares of Series C
Preferred Stock that the Selling Stockholder transfers to a non-affiliate will
automatically convert to Common Stock at the Conversion Rate. The Conversion
Rate is subject to certain anti-dilution adjustments that may be triggered any
time the Company (i) issues rights or warrants to the holders of Common Stock
entitling them to purchase Common Stock at below market price, (ii) effects any
stock splits or reverse stock splits of the Common Stock, (iii) reclassifies the
Common Stock into any other security or securities, (iv) is consolidated with,
or merges into, another entity or (v) sells substantially all of its assets.
Except as set forth above, the Conversion Rate will not be adjusted upon future
issuances of Common Stock by the Company.
VOTING RIGHTS. As long as the Selling Stockholder holds 25% or more of the
Fully Diluted Shares, it is entitled to vote its Series C Preferred Stock as a
separate class on (i) any liquidation, dissolution or winding-up of the Company,
(ii) any amendment to the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") or the Certificate of
Designation relating to the Series C Preferred Stock that, in either case,
adversely affects any rights of the Series C Preferred Stock, (iii) the creation
of any other class or series of preferred stock, (iv) the issuance of authorized
shares of any class of capital stock, (v) any merger or consolidation resulting
in shares of Common Stock or Series C Preferred Stock being converted into other
securities or the right to receive cash or other property, (vi) the sale, lease
or other conveyance of all or substantially of the Company's assets, whether in
one transaction or a series of related transactions, (vii) any amendments to the
By-laws or (viii) any transaction, or related series of transactions, resulting
in the redemption or repurchase of securities (other than Series C Preferred
Stock) that aggregate 10% or more of the Fully Diluted Shares.
44
<PAGE>
DIVIDENDS. A holder of the Series C Preferred Stock will participate in any
dividends paid on the Common Stock, whether in cash, securities or other
property, as if such holder's Series C Preferred Stock had been converted into
Common Stock at the Conversion Rate at that time.
OTHER PREFERRED STOCK
The Board of Directors, with the approval of the holder of the Series C
Preferred Stock (to the extent required, is authorized to issue additional
series of Preferred Stock and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series, without further vote or action by the stockholders. Although the
Company has no present plans to issue any shares of Preferred Stock following
consummation of the Offering, the issuance of additional series of Preferred
Stock may have the effect of delaying, deterring or preventing a change in
control of the Company without further action of the stockholders. The issuance
of any Preferred Stock with voting and conversion rights may adversely affect
the voting power of the holders of Common Stock, including the loss of voting
control to others.
THE NEW STOCKHOLDERS AGREEMENT
The New Stockholders Agreement provides that as long as the outstanding
Series C Preferred Stock represents 40% or more of the Fully Diluted Shares, (i)
the holder thereof will have the right to designate two individuals that the
Company will nominate for election to the Board of Directors each year and (ii)
each of the Audit Committee and the Compensation Committee will include two
directors who were so designated by the holder of the Series C Preferred Stock.
As long as the outstanding Series C Preferred Stock represents 25% or more (but
less than 40%) of the Fully Diluted Shares, (i) the holder thereof will have the
right to designate one individual that the Company will nominate for election to
the Board of Directors each year and (ii) each oof the Audit Committee and the
Compensation Committee will include one director who was so designated by the
holder of the Series C Preferred Stock.
The New Stockholders Agreement also provides that, beginning 180 days after
the Offering, the Selling Stockholder will have the right to request on two
separate occasions that the Company file a registration statement under the
Securities Act covering shares of Common Stock issued to the Selling Stockholder
upon conversion of Series C Preferred Stock ("Demand Registration Rights"). The
Selling Stockholder will be entitled to three additional Demand Registration
Rights if the Company becomes eligible to file a Registration Statement on Form
S-3. If, under certain other circumstances, the Company files a registration
statement covering shares of Common Stock, the Selling Stockholder will be
entitled to notice of such registration and, on two separate occasions, may
include in the offering shares of Common Stock issued to the Selling Stockholder
upon conversion of Series C Preferred Stock ("Piggyback Registration Rights").
The Selling Stockholder will receive additional Piggyback Registration Rights to
the extent that such rights are granted to any other stockholder of the Company.
The Company will pay the costs of any offering in which the Selling Stockholder
exercises its Demand or Piggyback Registration Rights, except that the Selling
Stockholder will pay its own legal fees and expenses and a proportionate share
of any underwriting discounts and commissions.
THE OLD STOCKHOLDERS AGREEMENT
The Company, the Selling Stockholder and each management stockholder are
parties to a Stockholders Agreement, dated as of January 3, 1994 (the "Old
Stockholders Agreement"). The Old Stockholders Agreement provides, among other
things, for the manner of election of directors, certain preemptive rights of
stockholders, and the treatment of shares held by the management of the Company.
Upon the consummation of the Offering, however, the Old Stockholders Agreement
and all provisions thereto will terminate.
45
<PAGE>
CERTAIN ANTI-TAKEOVER EFFECTS
SPECIAL PROVISIONS FOR SPECIAL MEETINGS OF THE STOCKHOLDERS OR BOARD OF
DIRECTORS. Amendments to the Certificate of Incorporation and Bylaws will be
effective upon the closing of the Offering, which will provide that, if the
outstanding Series C Preferred Stock represents less than 25% of the Fully
Diluted Shares, any action required or permitted to be taken by the stockholders
of the Company at an annual meeting or special meeting of stockholders may only
be taken if it is properly brought before such meeting, with advance notice
given to the Company, and may not be taken by written action in lieu of a
meeting. The Certificate of Incorporation further provides that special meetings
of the stockholders may only be called by the Chairman of the Board of
Directors, the Chief Executive Officer (or, if none, the President of the
Company) or the holders of 20% or more of the outstanding Common Stock. The
foregoing provisions could have the effect of delaying until the next
stockholders meeting stockholder actions which are favored by the holders of a
majority of the outstanding voting securities of the Company. These provisions
may also discourage another person or entity from making a tender offer for the
Common Stock, because such person or entity, even if it acquired a majority of
the outstanding voting securities of the Company, would be able to take action
as a stockholder (such as electing new directors or approving a merger) only at
a duly called stockholders meeting, and not by written consent.
ELECTION AND REMOVAL OF DIRECTORS. The Certificate of Incorporation
provides that directors may be removed with or without cause by the affirmative
vote of the holders of a majority of the Common Stock. Any vacancy on the Board
of Directors, however occurring, including a vacancy resulting from an
enlargement of the Board of Directors, may only be filled by vote of a majority
of the directors then in office. The limitations on the filling of vacancies
could have the effect of making it more difficult for a third party to acquire,
or for discouraging a third party from acquiring, control of the Company.
DIRECTORS' EXCULPATION AND INDEMNIFICATION. The Certificate of
Incorporation contains certain provisions permitted under the Delaware Law
relating to the liability of directors. The provisions eliminate a director's
liability for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. Further, the Bylaws contain provisions to indemnify
the Company's directors to the fullest extent permitted by the Delaware Law. The
Company has also entered into indemnification agreements with each director. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors. In addition, Mr. Kloster
has entered into a separate indemnification agreement with the Selling
Stockholder, pursuant to which the Selling Stockholder will indemnify Mr.
Kloster to the extent his indemnifiable losses are not recoverable from the
Company or any insurer of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services. Its telephone number is (213) 553-9700.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming that the Underwriters' over-allotment option is not exercised, upon
completion of the Offering, the Company will have outstanding 3,394,000 shares
of Common Stock and 5,206,000 shares of Series C Preferred Stock, which is
convertible into Common Stock at any time at a one-to-one conversion rate,
subject to adjustment in certain circumstances. The 2,000,000 shares of Common
Stock sold in the Offering (2,300,000 shares if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction under
the Securities Act, except for shares held by an "affiliate" of the Company, as
such term is defined under Rule 144 of the Securities Act. The remaining
6,600,000 shares of Common Stock (including 5,206,000 shares receivable upon
conversion of the outstanding Series C Preferred Stock) (the "Restricted
Shares") were issued and sold by the Company in private transactions and may be
publicly sold only if registered under the Securities Act or sold in accordance
with an applicable exemption from registration, such as Rule 144.
46
<PAGE>
All of the shares of Common Stock held by existing stockholders, which were
acquired in October 1993, are subject to lock-up agreements (as described below)
which restrict their sale prior to 180 days from the date of the Prospectus. A
total of approximately 1,394,000 shares of Common Stock (or 6,600,000 shares of
Common Stock if all outstanding Series C Preferred Stock were converted) subject
to these lock-up agreements will become eligible for sale beginning 180 days
from the date of the Prospectus, or earlier in the discretion of Lehman Brothers
Inc., upon expiration of these lock-up agreements, in accordance with certain
restrictions of Rule 144.
In general, under Rule 144 as currently in effect, beginning on the 91st day
after the Offering (but subject to the lock-up agreements), a person (or persons
whose shares are aggregated) who has beneficially owned Restricted Shares as to
which two years have elapsed between the later of the date of acquisition of the
securities from the Company or from an affiliate of the Company, is entitled to
sell, within any three-month period, a number of shares that does not exceed the
greater of 1% of the then-outstanding number of shares of Common Stock (33,940
shares immediately after the Offering) or the average weekly trading volume of
the Common Stock on the Nasdaq National Market System during the four calendar
weeks preceding the sale. Sales under Rule 144 are subject to certain "manner of
sale" provisions and notice requirements and to the availability of current
public information about the Company. The Securities and Exchange Commission has
adopted pending rule changes that will reduce the Rule 144 holding period from
two years to one.
The Company and its officers and directors and the Selling Stockholder have
agreed that, for a period of 180 days from the date of the Prospectus, they will
not, without the prior written consent of Lehman Brothers Inc., offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any other
capital stock of the Company.
The Company is unable to estimate the number of shares that may be sold in
the future by its existing stockholders or the effect, if any, that sales of
shares by stockholders will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock by
existing stockholders could adversely affect prevailing market prices.
47
<PAGE>
UNDERWRITING
The underwriters of the Offering named below (the "Underwriters"), for whom
Lehman Brothers Inc. and PaineWebber Incorporated are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, the form of which is filed as an
exhibit to the Registration Statement of which the Prospectus is a part, to
purchase from the Company and the Selling Stockholder, the aggregate number of
shares of Common Stock set forth opposite their respective names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
Lehman Brothers Inc........................................................
PaineWebber Incorporated...................................................
-----------------
Total.................................................................... 2,000,000
-----------------
-----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to approval of certain legal matters by counsel and to certain other
conditions, and that, if any of the foregoing shares of Common Stock are
purchased by the Underwriters pursuant to the Underwriting Agreement, all of the
shares of Common Stock agreed to be purchased by the Underwriters pursuant to
the Underwriting Agreement (other than those covered by the over-allotment
option described below) must be so purchased.
The Company and the Selling Stockholder have been advised that the
Underwriters propose to offer the shares of Common Stock directly to the public
initially at the public offering price set forth on the cover page of the
Prospectus, and to certain selected dealers (who may include the Underwriters)
at such public offering price less a selling concession not in excess of
$ per share. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $ per share to certain brokers and
dealers. After the initial public offering, the public offering price, the
concession to selected dealers and the reallowance may be changed by the
Representatives.
The Company has granted to the Underwriters an option to purchase up to an
additional 300,000 shares of Common Stock at the public offering price, less the
aggregate underwriting discounts and commissions shown on the cover page of the
Prospectus, solely to cover over-allotments, if any. The option may be exercised
at any time up to 30 days after the date of the Underwriting Agreement. To the
extent that the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.
The Company has agreed that, without the prior written consent of Lehman
Brothers Inc., it will not, subject to certain limited exceptions, directly or
indirectly, offer, sell, contract to sell or otherwise issue or dispose of any
shares of Common Stock or any other capital stock of the Company for 180 days
after the date of the Prospectus. All of the stockholders of the Company,
including the Selling Stockholder, have agreed that, without the prior written
consent of Lehman Brothers Inc., they will not, subject to certain limited
exceptions, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any other capital stock of the Company for a period of
180 days after the date of the Prospectus.
GE is the indirect parent of the Selling Stockholder. GE owns approximately
23% of PaineWebber Group, which is the holding company of PaineWebber
Incorporated. As a result of the foregoing, the Selling Stockholder is deemed to
be an affiliate of PaineWebber Incorporated, and the Offering is subject to the
provisions of Rule 2720 of the National Association of Securities Dealers, Inc.
(the "NASD"). Accordingly, the underwriting arrangements for the Offering will
conform with the requirements set forth in Rule 2720. In particular, the public
offering price of the Common Stock can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. In accordance
with
48
<PAGE>
this requirement, Lehman Brothers Inc. will serve in such role and will
recommend the public offering price in compliance with the requirements of Rule
2720. Lehman Brothers Inc., in its role as qualified independent underwriter,
has performed due diligence investigations and reviewed and participated in the
preparation of the Prospectus and the Registration Statement of which the
Prospectus forms a part.
Prior to the Offering, there has been no public market for the shares of
Common Stock. There can be no assurance that an active trading market will
develop for shares of the Common Stock or as to the price at which shares of the
Common Stock may trade in the public market from time to time subsequent to the
Offering. The initial public offering price will be negotiated between the
Company and the Representatives. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
capital structure, estimates of the business potential and earnings prospects of
the Company and its industry in general, an overall assessment of the Company,
an assessment of the Company's management and the market prices of securities of
companies engaged in businesses similar to that of the Company.
The Common Stock has been approved for quotation, subject to official notice
of issuance, on the Nasdaq National Market under the symbol "KTIC."
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act and to contribute, under certain circumstances, to payments that
the Underwriters may be required to make in respect thereof.
Purchasers of the Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the country
of purchase in addition to the offering price set forth on the cover page
hereof.
The Representatives have informed the Company that they do not intend to
confirm sales of shares of Common Stock offered hereby to any accounts over
which they exercise discretionary authority.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by O'Melveny & Myers LLP. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Latham & Watkins.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1996, and for each of the three years in the period ended December 31, 1996,
and the consolidated financial statements of Recoil Pty Ltd and subsidiaries as
of June 30, 1996 and for the year then ended, appearing in the Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as set forth in their reports with respect thereto, and are
included in reliance upon the authority of such firm as experts in giving said
reports.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
has filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S--1 under the Securities Act with respect to the
Common Stock offered hereby. The Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as a part thereof. Statements contained in the Prospectus as
to the contents of contracts or other documents are summaries of the material
provisions thereof. Copies of each contract or document referred to herein are
filed as exhibits to the Registration Statement. Copies of the Registration
Statement, including exhibits and schedules thereto, may be inspected without
charge at the Commission's principal office in Washington, D.C., or obtained at
prescribed rates from the Public Reference Section of
49
<PAGE>
the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center, New York,
New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60606. Copies of such materials may be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy information statements and other
information regarding registrants, like the Company, that file electronically
with the Commission. As long as the Common Stock is quoted and traded on the
Nasdaq National Market, such reports, proxy and information statements and other
information can also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
As a result of the Offering of the Common Stock, the Company will become
subject to the informational requirements of the Exchange Act. The Company
intends to furnish to its stockholders annual reports containing audited
financial information and furnish quarterly reports containing condensed
unaudited financial information for each of the first three quarters of each
fiscal year.
50
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
KAYNAR TECHNOLOGIES INC.
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996..................... F-4
Consolidated Balance Sheets as of December 31, 1995 and 1996............................................... F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1994, 1995 and 1996....... F-7
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996................. F-8
Notes to Consolidated Financial Statements................................................................. F-9
RECOIL PTY LTD
Report of Independent Public Accountants................................................................... F-19
Consolidated Statement of Income for the year ended June 30, 1996.......................................... F-20
Consolidated Balance Sheet as of June 30, 1996............................................................. F-21
Consolidated Statement of Stockholders' Equity for the year ended June 30, 1996............................ F-23
Consolidated Statement of Cash Flows for the year ended June 30, 1996...................................... F-24
Notes to Consolidated Financial Statements................................................................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Kaynar Technologies Inc.:
After the reorganization and the preferred stock conversion discussed in
Note 12 to Kaynar Technologies Inc. and subsidiaries' consolidated financial
statements are effected, we expect to be in a position to render the following
audit report.
ARTHUR ANDERSEN LLP
Orange County, California
February 25, 1997
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Kaynar Technologies Inc.:
We have audited the accompanying consolidated balance sheets of Kaynar
Technologies Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of income, 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 financial statements referred to above present fairly,
in all material respects, the financial position of Kaynar Technologies Inc. and
subsidiaries as of December 31, 1995 and 1996, and the 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.
ARTHUR ANDERSEN LLP
Orange County, California
February , 1997
F-3
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales, including $8,046, $8,755 and $11,437 in 1994, 1995 and 1996,
respectively, to a related party (see Note 13)........................ $ 55,117 $ 68,781 $ 99,023
Cost of sales........................................................... 41,117 51,940 72,924
------------ ------------ ------------
Gross profit.......................................................... 14,000 16,841 26,099
------------ ------------ ------------
Selling, general and administrative expenses............................ 9,048 10,018 13,263
------------ ------------ ------------
Operating income...................................................... 4,952 6,823 12,836
Interest expense, net................................................... 2,304 2,935 4,011
------------ ------------ ------------
Income before income taxes............................................ 2,648 3,888 8,825
Provision for income taxes.............................................. 1,129 1,577 3,530
------------ ------------ ------------
Net Income............................................................ $ 1,519 $ 2,311 $ 5,295
------------ ------------ ------------
------------ ------------ ------------
Earnings per share of common stock and common stock equivalents
outstanding........................................................... $ 0.22 $ 0.34 $ 0.78
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of shares of common stock and common stock
equivalents outstanding............................................... 6,800,000 6,800,000 6,800,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1995 AND 1996
ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Current assets:
Cash........................................................................................ $ 52 $ 909
Accounts receivable, including $1,487 and $1,987 in 1995 and 1996, respectively, from a
related party (see Note 13), net of allowance for doubtful accounts of $141 and $235 in
1995 and 1996, respectively............................................................. 11,382 15,392
Inventories............................................................................... 20,523 29,901
Prepaid expenses and other current assets................................................. 318 709
--------- ---------
Total current assets.................................................................. 32,275 46,911
--------- ---------
Property, plant and equipment, at cost...................................................... 13,994 24,160
Less accumulated depreciation and amortization............................................ (3,050) (5,451)
--------- ---------
10,944 18,709
--------- ---------
Intangible assets, net of accumulated amortization of $167 at December 31, 1996............. -- 7,815
Other assets................................................................................ 117 254
--------- ---------
$ 43,336 $ 73,689
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1995 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Current liabilities:
Revolving line-of-credit, to a related party (see Note 13)................................ $ 4,306 $ 746
Current portion of long-term debt......................................................... 830 1,457
Current portion of capital lease obligations.............................................. 22 133
Accounts payable.......................................................................... 3,217 6,105
Accrued payroll and related expenses...................................................... 3,175 5,330
Other accrued expenses.................................................................... 1,306 2,664
Deferred income taxes..................................................................... 428 288
--------- ---------
Total current liabilities............................................................. 13,284 16,723
--------- ---------
Long-term debt, primarily to a related party (see Note 13)................................ 24,318 45,176
Capital lease obligations................................................................. 105 332
Deferred income taxes..................................................................... 472 832
--------- ---------
24,895 46,340
--------- ---------
Commitments and contingencies (Notes 6 and 9)
Stockholders' equity:
Series C Convertible Preferred Stock,$0.01 par value; Authorized--10,000,000; issued and
outstanding--5,206,000 shares........................................................... 52 52
Common stock, $.01 par value; Authorized--20,000,000 shares; issued and
outstanding--1,594,000.................................................................. 16 16
Additional paid-in capital................................................................ 1,432 1,432
Retained earnings......................................................................... 3,639 8,838
Currency translation adjustment........................................................... 18 288
--------- ---------
Total stockholders' equity................................................................ 5,157 10,626
--------- ---------
$ 43,336 $ 73,689
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
PREFERRED STOCK
SERIES C COMMON STOCK ADDITIONAL CURRENCY
----------------------- ----------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
---------- ----------- ---------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
January 3, 1994................... 5,206,000 $ 52 1,594,000 $ 16 $ 1,432 $ -- $ --
Net income...................... -- -- -- -- -- 1,519 --
Dividends declared.............. -- -- -- -- -- (96) --
Currency translation
adjustment.................... -- -- -- -- -- -- 21
---------- --- ---------- --- ----------- ----------- -----
Balance, December 31, 1994........ 5,206,000 52 1,594,000 16 1,432 1,423 21
Net income...................... -- -- -- -- -- 2,311 --
Dividends declared.............. -- -- -- -- -- (95) --
Currency translation
adjustment.................... -- -- -- -- -- -- (3)
---------- --- ---------- --- ----------- ----------- -----
Balance, December 31, 1995........ 5,206,000 52 1,594,000 16 1,432 3,639 18
Net income...................... -- -- -- -- -- 5,295 --
Dividends declared.............. -- -- -- -- -- (96) --
Currency translation
adjustment.................... -- -- -- -- -- -- 270
---------- --- ---------- --- ----------- ----------- -----
Balance, December 31, 1996........ 5,206,000 $ 52 1,594,000 $ 16 $ 1,432 $ 8,838 $ 288
---------- --- ---------- --- ----------- ----------- -----
---------- --- ---------- --- ----------- ----------- -----
<CAPTION>
TOTAL
---------
<S> <C>
January 3, 1994................... $ 1,500
Net income...................... 1,519
Dividends declared.............. (96)
Currency translation
adjustment.................... 21
---------
Balance, December 31, 1994........ 2,944
Net income...................... 2,311
Dividends declared.............. (95)
Currency translation
adjustment.................... (3)
---------
Balance, December 31, 1995........ 5,157
Net income...................... 5,295
Dividends declared.............. (96)
Currency translation
adjustment.................... 270
---------
Balance, December 31, 1996........ $ 10,626
---------
---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................................... $ 1,519 $ 2,311 $ 5,295
Adjustments to reconcile net income to net cash provided by (used in)
operating activities--
Depreciation and amortization............................................... 1,351 1,754 2,613
Loss on sale of property, plant and equipment................................. 30 -- 34
Changes in operating assets and liabilities--
Increase in accounts receivable............................................... (2,190) (3,528) (2,505)
Increase in inventories....................................................... (1,095) (3,368) (6,867)
(Increase) decrease in prepaid expenses....................................... (12) 37 (152)
(Increase) decrease in other assets........................................... (35) (82) 181
Increase in accounts payable.................................................. 1,706 1,114 2,361
Increase in accrued expenses.................................................. 34 1,111 3,172
Increase in deferred income taxes............................................. 399 501 186
--------- --------- ----------
Net cash provided by (used in) operating activities......................... 1,707 (150) 4,318
--------- --------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment.................................... (2,423) (3,324) (6,850)
Proceeds from sales of property, plant and equipment.......................... 5 169 43
Acquisition, net of acquired cash of $34...................................... -- -- (12,160)
Increase in intangible assets................................................. -- -- (1,231)
--------- --------- ----------
Net cash used in investing activities....................................... (2,418) (3,155) (20,198)
--------- --------- ----------
Cash flows from financing activities:
Net borrowings (payments) on line-of-credit, from a related party (see Note
13)......................................................................... (1,938) 1,244 (3,560)
Borrowings on long-term debt, primarily from a related party (see Note 13).... 2,480 2,666 21,245
Payments on long-term debt, primarily to a related party (see Note 13)........ -- (789) (898)
Principal payments on capital lease obligations............................... -- (6) (55)
--------- --------- ----------
Net cash provided by financing activities................................... 542 3,115 16,732
--------- --------- ----------
Effect of exchange rate changes on cash......................................... -- -- 5
--------- --------- ----------
Net increase (decrease) in cash................................................. (169) (190) 857
Cash, beginning of period....................................................... 411 242 52
--------- --------- ----------
Cash, end of period............................................................. $ 242 $ 52 $ 909
--------- --------- ----------
--------- --------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest.................................................................... $ 2,006 $ 2,968 $ 3,787
--------- --------- ----------
--------- --------- ----------
Income Taxes................................................................ $ 743 $ 722 $ 2,841
--------- --------- ----------
--------- --------- ----------
Noncash financing activities:
Capital lease obligations assumed for the purchase of equipment............. $ -- $ 157 $ 355
--------- --------- ----------
--------- --------- ----------
Borrowings on long-term debt for preferred stock dividends.................. $ 96 $ 95 $ 96
--------- --------- ----------
--------- --------- ----------
Issuance of debt for purchase of assets of predecessor company.............. $ 25,695 $ -- $ --
--------- --------- ----------
--------- --------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF OPERATIONS AND FORMATION OF COMPANY
Kaynar Technologies Inc. (the "Company") is a manufacturer of specialty
fasteners, fastening systems and related components used primarily by original
equipment manufacturers and their subcontractors in the production of commercial
aircraft and defense products. In addition, the Company also manufactures other
specialty fasteners and related products for sale in the automotive, electronic
and other industrial markets, and their associated after-markets. The Company
designs and manufactures a substantial majority of its fasteners to its
customers' specifications and in a wide range of specialty metals, alloys and
composites.
The Company was originally incorporated (see Note 12) in Delaware in October
1993, and on January 3, 1994, purchased certain assets and assumed certain
liabilities of Microdot Inc., a Delaware corporation, that filed for protection
under Chapter 11 of the United States Bankruptcy Code and of Microdot Aerospace
Ltd., a United Kingdom corporation, which had filed for liquidation under the
laws of the United Kingdom.
The net assets acquired totaled approximately $25,695. The purchase price
was allocated to the net assets, based on the then fair market value (which
approximated net book value) as follows:
<TABLE>
<S> <C>
Current assets..................................................... $ 21,080
Property, plant and equipment...................................... 8,373
---------
Total assets....................................................... 29,453
Current liabilities................................................ 3,758
---------
Net assets..................................................... $ 25,695
---------
---------
</TABLE>
The acquisition was financed by the issuance of approximately $25,000 of
debt to the lender referred to in Note 6 who was also a secured lender to
Microdot Inc.
On August 11, 1996, the Company acquired substantially all of the assets of
Recoil Pty Ltd., an Australian corporation ("Recoil"). Recoil is a manufacturer
and distributor of thread inserts used primarily in the automotive, electronic
and other industrial markets, and their associated after-markets. The purchase
price of $12,194 was paid in cash (primarily obtained under terms of various
credit agreements, see Note 6). The total purchase price was allocated to the
net assets, based on the then fair market value, as follows:
<TABLE>
<S> <C>
Current assets..................................................... $ 4,245
Property, plant and equipment...................................... 3,044
Other noncurrent assets............................................ 300
Intangible assets.................................................. 6,687
---------
Total assets................................................... 14,276
Current liabilities................................................ 800
Noncurrent liabilities............................................. 1,282
---------
Net assets..................................................... $ 12,194
---------
---------
</TABLE>
F-9
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. NATURE OF OPERATIONS AND FORMATION OF COMPANY (CONTINUED)
The following unaudited pro forma consolidated statements of income
information present the results of the Company's operations for the years ended
December 31, 1995 and 1996, as though the acquisition of Recoil had occurred as
of the beginning of each respective fiscal year:
<TABLE>
<CAPTION>
1995 1996
--------- ----------
<S> <C> <C>
Net sales.............................................................. $ 77,449 $ 105,015
--------- ----------
--------- ----------
Net income............................................................. $ 2,793 $ 5,432
--------- ----------
--------- ----------
Earnings per share..................................................... $ 0.41 $ 0.80
--------- ----------
--------- ----------
</TABLE>
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisition taken place at the beginning of the fiscal year or the results that
may occur in the future. Furthermore, the pro forma results do not give effect
to cost savings or incremental costs which may occur as a result of the
integration and consolidation of Recoil. The pro forma results include
additional interest on borrowed funds and additional amortization of goodwill
resulting from the acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Kaynar
Technologies Inc. and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
C. REVENUE RECOGNITION
Sales and related costs are recorded by the Company upon shipment of
product. Revenues related to the leasing of the Company's K-Fast tools, which
are not significant, are recognized monthly over the term of the lease.
D. CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities of foreign subsidiaries are translated into United
States dollars at the year-end rate of exchange. Income and expense items are
translated at the average rates of exchange for the period. Gains and losses
resulting from translating foreign currency financial statements are accumulated
in a separate component of stockholders' equity. Foreign currency transaction
gains and losses are insignificant.
F-10
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
E. INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined
on a first-in, first-out (FIFO) method and market based upon the lower of
replacement cost or estimated realizable value. Inventory costs include
material, labor and factory overhead.
F. PROPERTY, PLANT AND EQUIPMENT
Depreciation is computed on the straight-line method over the estimated
useful lives of the depreciable assets (ranging from five to ten years). Cost
and accumulated depreciation for property retired or disposed of are removed
from the accounts and any gains or losses are reflected in operations. Major
renewals and betterments that extend the useful life of an asset are
capitalized.
G. INTANGIBLE ASSETS
Intangible assets primarily represent the excess of purchase price over fair
value of net assets acquired and related acquisition costs incurred in the
acquisition of Recoil. Intangibles are amortized using the straight-line method
from the date of acquisition over the expected period to be benefited, currently
estimated at 20 years. The Company assesses the recoverability of intangible
assets in accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of."
H. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable and accounts payable
approximate their fair value as of December 31, 1995 and 1996. The carrying
amounts of the line-of-credit and long-term debt approximate fair value because
the obligations bear interest at rates that fluctuate with the market rate. The
carrying amount of the term loans approximates fair value because the obligation
compares favorably with fixed rate obligations that would be currently available
to the Company.
I. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes," which
requires an asset and liability approach in accounting for income taxes payable
or refundable at the date of the financial statements as a result of all events
that have been recognized in the financial statements and as measured by the
provisions of enacted laws.
J. EARNINGS PER SHARE
Earnings per share are computed based on the weighted average number of
shares of common stock and common stock equivalents outstanding. The outstanding
Series C Convertible Preferred Stock are common share equivalents.
F-11
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INVENTORIES
Inventories consist of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Finished goods.......................................................... $ 4,914 $ 8,781
Components.............................................................. 3,715 4,628
Work in progress........................................................ 6,482 9,151
Raw materials........................................................... 2,080 2,790
Supplies and small tools................................................ 3,332 4,551
--------- ---------
$ 20,523 $ 29,901
--------- ---------
--------- ---------
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31, 1995
and 1996:
<TABLE>
<CAPTION>
YEARS OF
ESTIMATED
USEFUL LIFE 1995 1996
------------- --------- ---------
<S> <C> <C> <C>
Land..................................................... -- $ -- $ 30
Factory equipment........................................ 7 to 10 7,707 12,825
Equipment rented to others............................... 7 3,656 5,651
Office equipment......................................... 5 848 1,374
Leasehold improvements................................... Lease term 381 628
Construction in progress................................. -- 1,194 3,089
Equipment under capital lease............................ Lease term 208 563
--------- ---------
13,994 24,160
Accumulated depreciation and amortization................ (3,050) (5,451)
--------- ---------
$ 10,944 $ 18,709
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INCOME TAXES
The components of the net accumulated deferred income tax liability at
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Current deferred tax (asset) liability:
Inventory reserves........................................................ $ 1,161 $ 818
Accrued vacation.......................................................... (232) (205)
AMT credit................................................................ (472) --
Other..................................................................... (29) (325)
--------- ---------
$ 428 $ 288
--------- ---------
--------- ---------
Long-term deferred tax (asset) liability:
Foreign income............................................................ $ 59 $ (48)
Foreign tax credit........................................................ (53) --
Depreciation.............................................................. 466 880
--------- ---------
$ 472 $ 832
--------- ---------
--------- ---------
</TABLE>
The provision for income taxes includes income taxes currently payable and
those deferred because of temporary differences between the financial statements
and tax bases of assets and liabilities. The provision differs from the
statutory rates primarily due to permanent differences. The provision for income
taxes for the years ended December 31, 1994, 1995 and 1996, consists of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current provision:
Federal........................................................ $ 559 $ 854 $ 2,590
State.......................................................... 171 222 720
Deferred provision:
Federal........................................................ 355 456 69
State.......................................................... 44 45 151
--------- --------- ---------
$ 1,129 $ 1,577 $ 3,530
--------- --------- ---------
--------- --------- ---------
</TABLE>
The components of the Company's deferred income tax provision for the years
ended December 31, 1994, 1995 and 1996, which arise from tax credits and timing
differences between financial and tax reporting, are presented below:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Inventory reserves................................................. $ 1,109 $ 52 $ (343)
Accrued vacation................................................... (57) (175) 27
AMT credit......................................................... (656) 184 472
Foreign income..................................................... -- 59 (107)
Foreign tax credit................................................. -- (53) 53
Depreciation....................................................... 9 457 414
Other.............................................................. (6) (23) (296)
--------- --------- ---------
$ 399 $ 501 $ 220
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. INCOME TAXES (CONTINUED)
Variations from the federal statutory rate for the years ended December 31,
1994, 1995 and 1996, are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------ ------------------------ -------------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
--------- ------------- --------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory rate.......................... $ 900 34.0% $ 1,322 34.0% $ 3,001 34.0%
State income taxes, net of federal benefit...... 138 5.2 202 5.2 485 5.5
Foreign sales corporation benefit............... -- -- -- -- (141) (1.6)
Other........................................... 91 3.4 53 1.4 185 2.1
--------- --- --------- --- --------- ---
$ 1,129 42.6% $ 1,577 40.6% $ 3,530 40.0%
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>
6. DEBT ARRANGEMENTS
The Company has entered into Credit Agreements (the "Agreements") with
General Electric Capital Corporation (the "Lender"), who is also a significant
stockholder of the Company. The Agreements contain significant financial and
operating covenants, including limitations on the ability of the Company to
incur additional indebtedness and restrictions on, among other things, the
Company's ability to pay dividends or take certain other corporate actions. The
Agreements also require the Company to be in compliance with certain financial
ratios. In addition to the Agreements, the Company has entered into promissory
notes with other lenders for the purchase of equipment.
The following schedule summarizes the future annual minimum principal
payments due under the variable rate term loans (the "Term Loans"), other fixed
rate loans (the "Loans"), promissory notes (the "Notes") and Australian Trade
Commission Loan (the "ATC Loan") as of December 31, 1996:
<TABLE>
<CAPTION>
TERM
LOANS THE LOANS THE NOTES ATC LOAN TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1997.............................................................. $ 1,100 $ -- $ 249 $ 108 $ 1,457
1998.............................................................. 2,200 -- 273 216 2,689
1999.............................................................. 34,925 6,844 366 216 42,351
2000.............................................................. -- -- 27 109 136
--------- --------- --------- --------- ---------
$ 38,225 $ 6,844 $ 915 $ 649 $ 46,633
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Debt arrangements are described as follows:
A. TERM LOANS
During the year ended December 31, 1996, the Company amended an existing
Term Loan agreement, increasing the borrowing capacity of the Term Loan to
$28,225, with principal payable quarterly. Additionally, the Company (in
connection with its purchase of the net assets of Recoil, see Note 1)
entered into new Term Loans of $10,000. Each of the aforementioned Term
Loans is due and payable on January 3, 1999 and bears interest, payable
monthly, at the prime rate plus one and one-half percent (which was 9.75% at
December 31, 1996). At December 31, 1996, outstanding principal under the
Term Loans totaled $38,225. Interest expense for December 31, 1994, 1995 and
1996 was
F-14
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. DEBT ARRANGEMENTS (CONTINUED)
approximately $1,384, $1,904 and $2,400, respectively. The Term Loans are
secured by substantially all of the Company's assets.
B. THE LOANS
In association with its purchase of net assets from Microdot Inc. and
Microdot Aerospace Ltd. (see Note 1) and payment of dividends to the
preferred stockholder (see Note 13), the Company borrowed additional amounts
under other fixed rate loan agreements with the Lender. The principal on the
Loans is due and payable on January 3, 1999, while interest, which is
payable quarterly and may be added to the outstanding principal balance,
accrues at 11.5 percent. At December 31, 1996, there was approximately
$6,844 in principal, interest and dividends outstanding related to these
agreements.
C. THE NOTES
The Company has promissory notes with financing institutions which are
secured by certain machinery and equipment. At December 31, 1996, the
outstanding balance under the Notes was $915. The Notes bear interest at
interest rates ranging from 8.9 percent to 10.5 percent per annum. Monthly
payments are payable through June 2000.
D. ATC LOAN
The Company has a loan with the Australian Trade Commission which was
assumed as part of the Recoil asset purchase (see Note 1). At December 31,
1996, outstanding principal under the ATC Loan was $649. Interest accrues on
the outstanding principal balance at an effective interest rate of nine and
three quarters percent. Principal and interest payments are due
semi-annually beginning September 1997.
E. LINE-OF-CREDIT
The Line-of-Credit (LOC) is a $15,000 revolving credit facility, limited
by the lesser of a specified portion of qualified accounts receivable and
$15,000.
Interest is payable monthly, at the prime rate plus one and one-half
percent (which was 9.75% as of December 31, 1996). The LOC, which expires
January 3, 1999, had approximately $746 outstanding at December 31, 1996.
Interest expense for the years ended December 31, 1994, 1995 and 1996 was
approximately $447, $462 and $682, respectively. The weighted average
interest rate for all borrowings under the LOC was 8.6 percent, 10.3 percent
and 9.8 percent at December 31, 1994, 1995 and 1996, respectively.
7. SERIES C CONVERTIBLE PREFERRED STOCK
Each share of the Series C Preferred Stock is convertible at any time into
one share of Common Stock. The conversion rate is subject to certain
anti-dilutive adjustments. The Series C Preferred stock will participate in any
dividends paid on the Common Stock as if the Series C Preferred Stock had been
converted into Common Stock.
F-15
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. SERIES C CONVERTIBLE PREFERRED STOCK (CONTINUED)
In the event of any liquidation, dissolution or winding up of the Company,
the holders of the Series C Preferred Stock will be entitled to receive a
liquidation preference out of the assets available for distribution in an amount
equal to $0.22 per share, plus any accrued and unpaid dividends, before any
distribution is made to the holders of the Common Stock.
8. SAVINGS AND RETIREMENT PLAN
The Company sponsors a defined contribution plan (the "Retirement Plan"),
which provides benefits to all employees who have completed six months of
service. Employees may make contributions between one and 14 percent of their
annual compensation. The Company may make contributions to the Retirement Plan
at its own discretion.
The Company contributed approximately $236, $400 and $577 to the Retirement
Plan in the years ended December 31, 1994, 1995 and 1996, respectively.
9. COMMITMENTS AND CONTINGENCIES
A. OPERATING LEASES
The Company leases certain facilities and equipment under long-term
operating leases with varying terms. The leases generally provide that the
Company pay taxes, maintenance and insurance costs and some leases contain
renewal and/or purchase options. Total rental expense under operating leases
amounted to approximately $1,097, $1,209 and $1,187 in the years ended 1994,
1995 and 1996, respectively. Minimum rental expenses on commitments for the
years subsequent to December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1997................................................................ $ 1,314
1998................................................................ 1,184
1999................................................................ 980
2000................................................................ 423
2001................................................................ 146
Thereafter.......................................................... 15
---------
$ 4,062
---------
---------
</TABLE>
F-16
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
B. CAPITAL LEASES
The Company has entered into capital lease agreements for equipment.
Future lease payments due under the agreements are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1997................................................................ $ 139
1998................................................................ 133
1999................................................................ 125
2000................................................................ 107
2001................................................................ 36
---------
540
Amounts representing interest....................................... (75)
---------
465
Current portion..................................................... (133)
---------
$ 332
---------
---------
</TABLE>
C. CONTINGENCIES
The Company is, from time to time, subject to claims and disputes for
legal, environmental and other matters in the normal course of its business.
While the results of such matters cannot be predicted with certainty,
management does not believe that the final outcome of any pending matters
will have a material effect on the consolidated financial position and
results of operations.
10. SIGNIFICANT CUSTOMERS
For the years ended December 31, 1994, 1995 and 1996, two customers
accounted for approximately 28 percent, 28 percent and 30 percent of net sales,
respectively. No other customer accounted for greater than 10 percent of net
sales in the years ended December 31, 1994, 1995 and 1996. Accounts receivable
balances from these same two customers accounted for approximately 23 percent of
accounts receivable at December 31, 1995 and 28 percent at December 31, 1996. No
other customers represent more than 10 percent of the Company's gross accounts
receivable at December 31, 1995 and 1996.
F-17
<PAGE>
KAYNAR TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. GEOGRAPHIC SALES INFORMATION
Net sales for the years ended December 31, 1994, 1995 and 1996 were made to
geographic regions approximately as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------- ---------------------- ----------------------
AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
United States............................... $ 50,346 91.4% $ 62,041 90.2% $ 85,069 85.9%
Europe...................................... 2,800 5.1% 2,906 4.2% 8,378 8.5%
Pacific Rim................................. 404 0.7% 1,379 2.0% 2,256 2.3%
Other....................................... 1,567 2.8% 2,455 3.6% 3,320 3.3%
--------- ----- --------- ----- --------- -----
$ 55,117 100.0% $ 68,781 100.0% $ 99,023 100.0%
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
Sales for the Company's foreign operations represented less than 10 percent of
net sales during each of the years ended December 31, 1994, 1995 and 1996.
12. REORGANIZATION
In April 1997, Kaynar Technologies Inc. (Operating Company) merged with and
into Kaynar Holdings Inc. (Holding Company). The surviving corporation (Holding
Company) changed its name to Kaynar Technologies Inc. In connection with the
reorganization, each outstanding share of Common Stock of the Company was
exchanged for 68 shares of Common Stock, each outstanding share of Series A
Preferred Stock was exchanged for 9.953 shares of Common Stock and 58.047 shares
of Series C Convertible Preferred Stock, par value .01 per share, and each
outstanding share of Series B Preferred Stock was exchanged for 68 shares of
Series C Preferred Stock. The effect of the reorganization and stock conversion
has been retroactively reflected in the accompanying financial statements for
all years presented.
13. RELATED PARTY MATTERS
As discussed in Notes 1 and 6, the primary lender to the Company is General
Electric Capital Corporation ("GECC"). Subsequent to the Reorganization and
immediately prior to the Offering, GECC will own 12.5 percent of the outstanding
Common Stock and 100 percent of the outstanding Series C Convertible Preferred
Stock, which equates to 79.5 percent of the total outstanding Common Stock and
Common Stock equivalents. As discussed in Note 1, this lender was also a secured
primary lender to Microdot Inc., a predecessor of the Company.
GECC is also an affiliated entity to a customer (the Aircraft Engines
Division of GE) that accounted for approximately 12 percent of 1996 net sales
and 13 percent of accounts receivable at December 31, 1996.
F-18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Kaynar Technologies Inc.:
We have audited the accompanying consolidated balance sheet of Recoil Pty
Ltd (see Note 7) and Subsidiaries as of June 30, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Recoil Pty Ltd and
Subsidiaries as of June 30, 1996, and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Melbourne, Australia
February 21, 1997
F-19
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
Net sales....................................................................... $9,707,335
Cost of sales................................................................... 4,218,327
---------
Gross profit.................................................................... 5,489,008
---------
Bad debts and provision for doubtful accounts................................... 9,847
Selling, general and administrative expenses.................................... 4,251,743
---------
Operating income................................................................ 1,227,418
Other expenses.................................................................. 60,348
Non-operating income............................................................ 147,355
Interest expense, net........................................................... 49,595
---------
Income before income taxes...................................................... 1,264,830
Provision for income taxes...................................................... 404,283
---------
Net income...................................................................... $ 860,547
---------
---------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-20
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 1996
ASSETS
<TABLE>
<CAPTION>
Current Assets:
<S> <C>
Cash............................................................................ $ 105,459
Accounts receivable, including $56,228 from a related party, net of allowance
for doubtful accounts of $32,996.............................................. 1,888,810
Inventories..................................................................... 2,295,380
Prepaid expenses and other current assets....................................... 120,120
---------
Total current assets............................................................ 4,409,769
---------
Property, plant and equipment, at cost.......................................... 2,276,343
Less accumulated depreciation and amortization.................................. (962,464)
---------
1,313,879
---------
Goodwill, net of accumulated amortization of $34,162............................ 37,134
Other assets.................................................................... 882
---------
Total non-current assets........................................................ 1,351,895
---------
Total assets.................................................................... $5,761,664
---------
---------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-21
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS AT JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current Liabilities:
<S> <C>
Lines of credit, secured by substantially all assets............................ $ 451,514
Current portion of capital lease obligations.................................... 14,900
Accounts payable................................................................ 802,923
Accrued expenses................................................................ 408,691
Income taxes payable............................................................ 365,236
---------
Total current liabilities....................................................... 2,043,264
---------
Long-term debt.................................................................. 649,481
Capital lease obligation........................................................ 33,384
---------
Total non-current liabilities................................................... 682,865
---------
Total liabilities............................................................... 2,726,129
---------
Commitments and contingencies (Note 5)
Stockholders' Equity:
Common stock, par value $0.24
Authorized--10,100,000 shares
Issued and outstanding--1,372,968 shares...................................... 324,693
Common stock, par value $0.79
Authorized--5,000,000 shares
Issued and outstanding--892,859 shares........................................ 703,841
Additional Paid-in Capital...................................................... 1,050,297
Retained earnings............................................................... 956,704
---------
Total stockholders' equity...................................................... 3,035,535
---------
Total liabilities and equity.................................................... $5,761,664
---------
---------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-22
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK ADDITIONAL
PAR VALUE PAR VALUE PAID-IN
$0.24 $0.79 CAPITAL RETAINED EARNINGS TOTAL
-------------- -------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1995......... $ 324,693 $ 703,841 $ 1,050,297 $ 96,157 $ 2,174,988
Net income..................... -- -- -- 860,547 860,547
-------------- -------------- -------------- -------- ------------
Balance, June 30, 1996......... $ 324,693 $ 703,841 $ 1,050,297 $ 956,704 $ 3,035,535
-------------- -------------- -------------- -------- ------------
-------------- -------------- -------------- -------- ------------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-23
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net income....................................................................... $ 860,547
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................. 295,626
Loss on sale of property, plant and equipment.................................. (10,291)
Decrease in accounts receivable................................................ 136,049
Increase in inventories........................................................ (679,772)
Increase in prepaid expenses................................................... (84,570)
Increase in other assets....................................................... (86,925)
Decrease in accounts payable................................................... (240,066)
Increase in accrued expenses................................................... 128,315
Decrease in deferred income taxes.............................................. (24,384)
---------
Net cash provided by operating activities........................................ 294,529
---------
Cash Flows from Investing Activities:
Purchases of plant and equipment................................................. (741,239)
Proceeds from sales of property, plant and equipment............................. 250,811
---------
Net cash used in investing activities............................................ (490,428)
---------
Cash Flows from Financing Activities:
Net borrowings (payments) on line-of-credit...................................... 340,338
Dividends paid................................................................... (141,894)
Principal payments on capital lease obligation................................... (22,103)
Net cash provided by financing activities........................................ 176,341
Net increase/(decrease) in cash.................................................. (19,558)
Cash, beginning of period........................................................ 125,017
---------
Cash, end of period.............................................................. $ 105,459
---------
---------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest....................................................................... $ 42,631
---------
---------
Income taxes................................................................... $ 348,633
---------
---------
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-24
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS
FOR THE YEAR ENDED JUNE 30, 1996
NOTE 1. LINE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The company manufactures and distributes thread inserts and related products
used primarily in the electronic, automotive and other industrial markets, and
their associated after-markets. The company is headquartered in Oakleigh,
Australia, which is outside Melbourne. The consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles.
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Recoil Pty Ltd
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
(b) Goodwill
Goodwill is amortized on a straight line basis over 20 years.
(c) Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated
depreciation or amortization. The carrying amount of property, plant and
equipment is reviewed annually to ensure it is not in excess of the recoverable
amount from those assets. The recoverable amount is assessed on the basis of the
expected net cash flows which will be received from the assets employment and
subsequent disposal. The expected net cash flows have not been discounted to
present values in determining recoverable amount.
The depreciable amounts of all fixed assets, including capitalized leased
assets, are depreciated over their estimated useful lives commencing from the
time the asset is held ready for use.
(d) Income Tax
The company uses the liability method of tax-effect accounting whereby the
income tax expense shown in the profit and loss account is based on the pre-tax
accounting profit adjusted for any permanent differences.
Temporary differences which arise due to the different accounting periods in
which items of revenue and expense are included in the determination of
operating profit before income tax and taxable income are recorded either as
provision for deferred income tax or an asset described as future income tax
benefit at the rate of income tax applicable to the period in which the benefit
will be received or the liability will become payable.
Future income tax benefits are not recorded unless realization of the asset
is assured. The amount of benefits recorded which may be realized in the future
is based on the assumption that no adverse change will occur in income taxation
legislation, and the anticipation that the company will derive sufficient future
taxable income and comply with the conditions of deductibility imposed by the
law to permit a future income tax benefit to be obtained.
The provision for income taxes is as follows:
<TABLE>
<S> <C>
Tax at 36% statutory rate......................................... $ 455,339
Increase/(decrease) in income tax expense due to:
Non-allowance items............................................. 869
Tax incentives and sundry items................................. (50,288)
Net operating loss carry-forwards not realized.................. 42,034
Tax effect of intercompany profit in inventory.................. (41,391)
Other........................................................... (2,280)
---------
Income tax expense................................................ $ 404,283
---------
---------
</TABLE>
F-25
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1996
NOTE 1. LINE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
(e) Foreign Currency
TRANSACTIONS
Foreign currency transactions during the year are converted to the
Australian dollar at rates of exchange applicable at the dates of the
transactions. Amounts receivable and payable in foreign currencies at the
balance sheet date are converted at the rates of exchange ruling at that date.
The gains and losses from conversion of short-term assets and liabilities,
whether realized or unrealized, are included in operating profit before income
tax as they arise.
TRANSLATION OF FINANCIAL STATEMENTS
The Australian dollar is the functional currency. These financial statements
have been translated into US dollars using the year-end exchange rate for the
consolidated balance sheet and the average exchange rate for the year for the
consolidated statement of income.
(f) Inventories
Inventories are measured at the lower of cost and net realizable value.
Costs are assigned on a first-in, first-out basis and include direct materials,
direct labor and an appropriate portion of variable and fixed overhead expenses.
Inventories are composed of the following at June 30, 1996:
<TABLE>
<S> <C>
Raw materials................................................... $ 380,123
Work in progress................................................ 71,304
Finished goods.................................................. 1,843,953
---------
$2,295,380
---------
---------
</TABLE>
NOTE 2. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<S> <C>
Fixtures and fittings--at cost.................................. $ 156,662
Less: Accumulated depreciation.................................. (54,561)
---------
102,101
---------
Office equipment--at cost....................................... 486,264
Less: Accumulated depreciation.................................. (292,546)
---------
193,718
---------
Motor vehicles--at cost......................................... 132,492
Less: Accumulated depreciation (58,443)
---------
74,049
---------
Plant and equipment--at cost.................................... 1,324,363
Less: Accumulated depreciation.................................. (548,009)
---------
776,354
---------
</TABLE>
F-26
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1996
NOTE 2. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
<TABLE>
<S> <C>
Capital equipment--work in progress............................. 134,569
---------
Leased motor vehicles........................................... 41,993
Less: Accumulated amortization.................................. (8,905)
---------
33,088
---------
$1,313,879
---------
---------
</TABLE>
NOTE 3. ACCRUED EXPENSES
<TABLE>
<S> <C>
Other creditors................................................... $ 261,618
Wages and payroll related......................................... 147,073
---------
$ 408,691
---------
---------
</TABLE>
NOTE 4. LONG-TERM DEBT AND FINANCING ARRANGEMENTS
<TABLE>
<S> <C>
Loan--Government Agency (Australian Trade Commission)............. $ 649,481
---------
</TABLE>
This loan is unsecured and bears interest at an effective interest rate of
9.75% per annum. Principal and interest payments are due semi-annually beginning
in September 1997.
Principal repayments for the years ended December 31 are as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 108,061
1998.......................................................... 216,062
1999.......................................................... 216,062
2000.......................................................... 109,296
---------
Financing Arrangements
The company has a finance facility of:........................ $ 945,960
---------
At June 30, 1996 this facility was drawn upon in the amount
of:......................................................... $ 451,514
---------
---------
</TABLE>
F-27
<PAGE>
RECOIL PTY LTD AND SUBSIDIARIES
NOTES TO AND FORMING PART OF THE CONSOLIDATED ACCOUNTS (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1996
NOTE 5. LEASE COMMITMENTS
<TABLE>
<S> <C>
(a) Capital Lease Commitments Payable:
--not later than one year....................................... $ 16,390
--later than one year and not later than two years.............. 13,544
--later than two years and not later than five years............ 23,755
---------
Minimum lease payments.......................................... 53,689
Less: Future finance charges.................................... (5,405)
---------
Total........................................................... $ 48,284
---------
---------
Representing:
--Current....................................................... $ 14,900
--Non-Current................................................... 33,384
---------
$ 48,284
---------
(b) Operating Lease Commitments Payable:
--not later than one year....................................... $ 175,492
--later than one year and not later than two years.............. 180,248
--later than two years and not later than five years............ 571,465
---------
Total operating lease commitments............................... $ 927,205
---------
</TABLE>
NOTE 6. SEGMENT REPORTING
The economic entity operates in the manufacturing sector where it
manufactures Recoil thread inserts in Australia and distributes its products
throughout Australia, USA, UK and other international markets.
NOTE 7. SUBSEQUENT EVENT
In August 1996 the company sold a majority of its assets to Kaynar
Technologies Inc., a US business involved in the manufacture and sale of
specialty fasteners, fastening system and components, for approximately $12.2
million. Subsequent to the asset sale, the company changed its name to Scuba Pty
Ltd.
F-28
<PAGE>
[IMAGE MATERIAL: PICTURE OF AIRCRAFT IN FLIGHT.]
<PAGE>
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 8
The Company.......................................... 13
The Reorganization................................... 13
Use of Proceeds...................................... 14
Dividend Policy...................................... 14
Capitalization....................................... 15
Dilution............................................. 15
Selected Consolidated Financial and Operating
Information........................................ 17
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 19
Business............................................. 24
Management........................................... 35
Certain Transactions................................. 41
Principal Stockholders and Selling Stockholder....... 43
Description of Capital Stock......................... 44
Shares Eligible for Future Sale...................... 46
Underwriting......................................... 48
Legal Matters........................................ 49
Experts.............................................. 49
Additional Information............................... 49
Index to Consolidated Financial Statements........... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,000,000 SHARES
KAYNAR TECHNOLOGIES INC.
COMMON STOCK
-------------------
PROSPECTUS
, 1997
---------------------
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates,
except the SEC registration fee and the NASD fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee..............................................................
NASD fee..........................................................................
Printing and engraving expenses...................................................
Legal fees and expenses...........................................................
Accounting fees and expenses......................................................
Blue Sky qualification fees and expenses..........................................
Transfer Agent and Registrar fees.................................................
Miscellaneous fees and expenses...................................................
----------
Total......................................................................... $ 675,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation, as amended, of the Company contains a
provision eliminating the personal liability of the directors to the Company or
its stockholders to the fullest extent set forth in Section 102(b)(7) of the
Delaware General Corporation Law. The Bylaws of the Company provide for
indemnification of directors, officers, employees and agents of the Company
consistent with the provisions of Section 145 of the Delaware General
Corporation Law. The Company has also entered into indemnification agreements
with each director and certain executive officers that provide for the maximum
protection against liability permitted by law. The indemnification agreements
also provide that, to the extent the Company purchases directors and officers
insurance, the directors and officers who are parties to such agreements will be
covered. The Company, however, has no obligation to purchase such insurance.
Reference is also made to Section 9 of the Underwriting Agreement, contained in
Exhibit 1 hereto, indemnifying officers and directors of the Company against
certain liabilities.
Burton J. Kloster, Jr., an outside director of the Company and the nominee
of GECC, has entered into a separate indemnification agreement with GECC. Under
the agreement, GECC will indemnify Mr. Kloster for losses, liabilities, damages
and expenses incurred as a result of his acting properly on behalf of GECC, to
the extent such amounts are not recoverable from the Company or any insurer of
the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
None.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------------
<C> <S>
+1.1 Form of Underwriting Agreement
+2.1 Agreement and Plan of Merger, dated April , 1997, between the Company and Operating Company
2.2 Asset Purchase Agreement, dated January 9, 1996, among Emhart Industries, Inc., Emhart, Inc. and
Operating Company
2.3(a) Australian Asset Sale Agreement, dated August 9, 1996, among the Vendors (as defined therein),
Recoil Inc., RCL Pty. and Operating Company
2.3(b) US Asset Sale Agreement, dated August 9, 1996, among Recoil Inc., Operating Company, Recoil Pty.
Ltd., the Advent Group and the Price Interests (as defined therein)
+3.1 Amended and Restated Certificate of Incorporation of the Company
+3.2 Amended and Restated Bylaws of the Company
+4.1 Specimen of Common Stock Certificate
+5.1 Opinion of O'Melveny & Myers LLP regarding the legality of the Common Stock to be issued
10.1 Amended and Restated Term Loan Agreement, dated August 12, 1996, between the Company and GECC
10.2(a) Amended and Restated Credit Agreement, dated August 12, 1996, between Operating Company and GECC
10.2(b) First Amendment, Consent, and Limited Waiver to Amended and Restated Credit Agreement, dated
December 17, 1996, between Operating Company and GECC
10.3 Term Loan Agreement, dated August 12, 1996, between RCL Pty. and GECC
10.4 PIK Dividend Note Agreement, dated January 3, 1994, among the Company, GECC and certain other
parties identified therein
10.5 Lease with The Prudential Insurance Co. of America regarding the Fullerton, California facility
10.6 Lease with West L.A. Properties regarding the Placentia, California facility
10.7 Lease with Enfield View Pty. Ltd. regarding the Oakleigh, VIC, Australia facility
10.8(a) General Terms Agreement, dated September 20, 1996, between the Company and Boeing
10.8(b) Special Business Provisions, dated September 20, 1996, between the Company and Boeing
(confidential treatment requested)
10.9 Contract Award Letter of Agreement, dated April 28, 1994, between the Company and Boeing
(confidential treatment requested)
+Stockholders
Agreement
dated as of
March ,
1996
21.1 List of Subsidiaries
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------------ ------------------------------------------------------------------------------------------------
23.1 Consent of Independent Auditors
<C> <S>
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
+27.1 Financial Data Schedule
99.1 Form of 1997 Stock Incentive Plan of the Company
99.2 Form of Employment Agreement for Messrs. Law and Werner
99.3 Form of Employment Agreement for Messrs. Beers, Dack, Berecz and Varholick
99.4 Employment Agreement for Kenneth D. Jones
99.5 Form of Director Indemnification Agreement
</TABLE>
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Commission are provided in the Notes to the Consolidated
Financial Statements included elsewhere in this Registration Statement or are
not required under the applicable instructions or are inapplicable and therefore
have been omitted.
- ------------------------
+ To be filed by pre-effective amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, 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 hereunder, the Registrant will,
unless in the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fullerton, State of
California on this 25th day of February, 1997.
KAYNAR TECHNOLOGIES INC.
By:/s/ JORDAN A. LAW
--------------------------------------
Jordan A. Law
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Jordan A. Law and David A. Werner, and
each of them acting individually, as his attorney in fact, each with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments),
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys to any and
all amendments to said Registration Statement, or any related registration
statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933.
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- -------------------------------------------- ----------------------
<S> <C> <C>
/s/ JORDAN A. LAW Chief Executive Officer and Chairman of the February 25, 1997
- ---------------------------------- Board
Jordan A. Law (Principal Executive Officer)
/s/ DAVID A. WERNER Executive Vice President and Director February 25, 1997
- ---------------------------------- (Principal Financial Officer)
David A. Werner
/s/ ROBERT M. NELSON Controller February 25, 1997
- ---------------------------------- (Principal Accounting Officer)
Robert M. Nelson
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
+1.1 Form of Underwriting Agreement
+2.1 Agreement and Plan of Merger, dated April , 1997, between the Company and Operating Company
2.2 Asset Purchase Agreement, dated January 9, 1996, among Emhart Industries, Inc., Emhart, Inc. and
Operating Company
2.3(a) Australian Asset Sale Agreement, dated August 9, 1996, among the Vendors (as defined therein), Recoil
Inc., RCL Pty. and Operating Company
2.3(b) US Asset Sale Agreement, dated August 9, 1996, among Recoil Inc., Operating Company, Recoil Pty.
Ltd., the Advent Group and the Price Interests (as defined therein)
+3.1 Amended and Restated Certificate of Incorporation of the Company
+3.2 Amended and Restated Bylaws of the Company
+4.1 Specimen of Common Stock Certificate
+5.1 Opinion of O'Melveny & Myers LLP regarding the legality of the Common Stock to be issued
10.1 Amended and Restated Term Loan Agreement, dated August 12, 1996, between the Company and GECC
10.2(a) Amended and Restated Credit Agreement, dated August 12, 1996, between Operating Company and GECC
10.2(b) First Amendment, Consent, and Limited Waiver to Amended and Restated Credit Agreement, dated December
17, 1996, between Operating Company and GECC
10.3 Term Loan Agreement, dated August 12, 1996, between RCL Pty. and GECC
10.4 PIK Dividend Note Agreement, dated January 3, 1994, among the Company, GECC and certain other parties
identified therein
10.5 Lease with The Prudential Insurance Co. of America regarding the Fullerton, California facility
10.6 Lease with West L.A. Properties regarding the Placentia, California facility
10.7 Lease with Enfield View Pty. Ltd. regarding the Oakleigh, VIC, Australia facility
10.8(a) General Terms Agreement, dated September 20, 1996, between the Company and Boeing
10.8(b) Special Business Provisions, dated September 20, 1996, between the Company and Boeing (confidential
treatment requested)
10.9 Contract Award Letter of Agreement, dated April 28, 1994, between the Company and Boeing
(confidential treatment requested)
+Stockholders
Agreement
dated as
of March
, 1996
21.1 List of Subsidiaries
23.1 Consent of Independent Auditors
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
+27.1 Financial Data Schedule
99.1 Form of 1997 Stock Incentive Plan of the Company
99.2 Form of Employment Agreement for Messrs. Law and Werner
99.3 Form of Employment Agreement for Messrs. Beers, Dack, Berecz and Varholick
99.4 Employment Agreement for Kenneth D. Jones
99.5 Form of Director Indemnification Agreement
</TABLE>
- ------------------------
+ To be filed by pre-effective amendment.
<PAGE>
ASSET PURCHASE AGREEMENT
dated as of
January 9, 1996
among
EMHART INDUSTRIES, INC.,
EMHART, INC.
and
KAYNAR TECHNOLOGIES INC.
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TABLE OF CONTENTS
SECTION PAGE
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ARTICLE 1
PURCHASE AND SALE OF ASSETS................................... 1
1.1 Sale of Assets................................................ 1
1.1.1 Names......................................................... 1
1.1.2 Inventory..................................................... 1
1.1.3 Equipment..................................................... 1
1.1.4 Intellectual Property......................................... 2
1.1.5 Sales Materials............................................... 2
1.1.6 Books and Records............................................. 2
1.1.7 Assigned Contracts............................................ 2
1.2 Accounts and Work-In-Process Not Transferred.................. 2
ARTICLE 2
CLOSING/DELIVERY OF ASSETS/PURCHASE PRICE/
ASSUMPTION OF LIABILITIES................................... 3
2.1 The Closing................................................... 3
2.2 Selection of Inventory and Equipment/Purchase Price/Closing
Date.......................................................... 3
2.2.1 Purchase of Inventory and Equipment/Determination of Inventory
Price and Equipment Price..................................... 3
2.2.2 Closing Date and Purchase Price............................... 5
2.2.3 Allocation of Purchase Price.................................. 6
2.3 Payments to Seller............................................ 6
2.4 Instruments of Conveyance and Transfer........................ 7
2.5 Assumption of Certain Liabilities............................. 7
2.6 Non-Assumption of Liabilities................................. 7
2.7 Sales and Use Tax............................................. 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER...................... 8
3.1 Organization, Corporate Power and Authority................... 8
3.2 Authorization of Agreements................................... 8
3.3 Effect of Agreement........................................... 8
3.4 Permits....................................................... 8
3.5 Assigned Contracts............................................ 9
3.6 Sufficiency of Property....................................... 9
3.7 Equipment..................................................... 9
3.8 Inventory..................................................... 9
3.9 Legal Proceedings............................................. 9
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3.10 Compliance with Law........................................... 9
3.11 Intellectual Property......................................... 10
3.12 Taxes and Proration........................................... 10
3.13 Insurance..................................................... 10
3.14 Worker Adjustment and Retraining Notification................. 10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER....................... 11
4.1 Organization, Corporate Power and Authority................... 11
4.2 Authorization of Agreement.................................... 11
4.3 Effect of Agreement........................................... 11
4.4 Financing..................................................... 11
ARTICLE 5
COVENANTS WITH RESPECT TO
CONDUCT OF SELLER AND BUYER PRIOR TO CLOSING............... 12
5.1 Access........................................................ 12
5.2 Material Adverse Changes...................................... 12
5.3 Conduct of Business........................................... 12
5.4 Preservation of Business Prior to Delivery Date of Retained
Equipment..................................................... 13
5.5 Disposal of Inventory and Equipment Not Selected for Purchase. 14
ARTICLE 6
ADDITIONAL CONTINUING COVENANTS............................... 14
6.1 Permits and Approvals......................................... 14
6.2 Nondisclosure of Proprietary Data............................. 14
6.3 Access to Information......................................... 15
ARTICLE 7
CONDITIONS OF PURCHASE........................................ 15
7.1 General Conditions............................................ 15
7.2 Conditions to Obligations of Buyer............................ 15
7.3 Conditions to Obligations of Seller........................... 16
ARTICLE 8
INDEMNIFICATION............................................... 16
8.1 Obligations of Seller......................................... 16
8.2 Obligations of Buyer.......................................... 17
8.3 Notice and Defense............................................ 17
ARTICLE 9
GENERAL....................................................... 18
9.1 Amendments; Waivers........................................... 18
9.2 Schedules; Exhibits; Integration.............................. 18
9.3 Further Assurances............................................ 18
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9.4 Governing Law................................................. 19
9.5 Counterparts.................................................. 19
9.6 Remedies Cumulative........................................... 19
9.7 Notices....................................................... 19
9.8 Expenses and Attorneys Fees................................... 20
9.9 Survival...................................................... 21
9.10 Specific Performance; Return of Initial Payment............... 21
9.11 Bulk Transfer Laws............................................ 21
9.12 No Assignment................................................. 22
9.13 Headings...................................................... 22
ARTICLE 10
DEFINITIONS................................................... 22
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EXHIBITS
EXHIBIT A Assignment and Assumption Agreement
EXHIBIT B Bill of Sale
EXHIBIT C Form of Assignment of Intellectual Property Rights
EXHIBIT D Form of Non-Competition Agreement
EXHIBIT E Valiant Supply Agreement
EXHIBIT F The Business
SCHEDULES
1.1.1 - Names
1.1.3 - Equipment
1.1.4 - Intellectual Property
1.1.7 - Assigned Contracts
1.2 - Excluded Assets
2.2.1 - Inventory Price Calculation Procedure
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of January 9, 1996,
among Kaynar Technologies Inc., a Delaware corporation ("BUYER"), Emhart
Industries, Inc., a Connecticut corporation ("SELLER") and Emhart, Inc., a
Delaware corporation ("INTELLECTUAL PROPERTY SELLER"). Capitalized terms used
herein without definition are defined in Article 10.
A G R E E M E N T
In consideration of the mutual promises contained herein and intending
to be legally bound, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 SALE OF ASSETS. (a) Subject to the terms and conditions of this
Agreement Seller (and Intellectual Property Seller with respect to the
Intellectual Property owned by it) will sell, transfer and assign to Buyer, and
Buyer will purchase from Seller, all of Seller's right, title and interest in
and to the following assets (collectively, the "ASSETS"):
1.1.1 NAMES. All of Seller's right to use the name "KELOX" and
the other tradenames or product names set forth on SCHEDULE 1.1.1 (the
"NAMES");
1.1.2 INVENTORY. All raw materials, product samples, parts,
finished goods, and inventory owned by the Seller and relating principally
to the Business and existing as of the date hereof (the "INVENTORY"), but
solely to the extent that Buyer is required or elects to purchase such
Inventory pursuant to Section 2.2.1(B) hereof; provided that Buyer shall
not purchase any Inventory required by Seller to fill orders existing as of
the date hereof (or which may be placed following the date hereof and
before Closing) and delivery of which is due on or before 60 days following
Closing (the "CUSTOMER ORDER BACKLOG"), and, within 10 days of the date
hereof, Seller shall provide Buyer with a reasonably detailed written
description of the Inventory which Seller estimates it may need with
respect to the Customer Order Backlog;
1.1.3 EQUIPMENT. The machinery, equipment, furniture, supplies,
tools, designs, patterns, molds, office equipment and supplies, computer
hardware and other tangible property listed on SCHEDULE 1.1.3 annexed
hereto (such assets being collectively referred to as the "EQUIPMENT"),
but solely to the extent that Buyer elects to purchase such Equipment
pursuant to Section 2.2.1(C) hereof;
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1.1.4 INTELLECTUAL PROPERTY. All trademarks and trade names,
trademark and trade name registrations, service marks and service mark
registrations, copyright registrations, the applications therefor and the
licenses with respect thereto all as identified on SCHEDULE 1.1.4, and all
unregistered copyrights engineering reports and specifications, technical
information, trade secrets, secret processes, confidential information,
know-how, and other intellectual property of the Seller or Intellectual
Property Seller, as the case may be, used or held for use primarily in the
Business, together with the goodwill appurtenant to each of the foregoing
(collectively, the "INTELLECTUAL PROPERTY");
1.1.5 SALES MATERIALS. All of Seller's sales and purchase data
and information (including sales history), customer lists, pricing sheets,
product costs, supplier lists, mailing lists, catalogues, brochures, sales
literature, promotional material, advertising material, and other selling
material, in each case, pertaining to the Assets, the Assumed Liabilities
or otherwise to the Business (collectively, the "SALES MATERIALS");
1.1.6 BOOKS AND RECORDS. All books and records and all files,
documents and papers (including, but not limited to, those contained in
computerized storage media) principally pertaining to the Assets, the
Assumed Liabilities or otherwise to the Business, including, without
limitation, all manufacturing documentation to the extent not included in
the Intellectual Property (collectively, the "BOOKS AND RECORDS");
1.1.7 ASSIGNED CONTRACTS. All rights of Seller under all of the
Contracts (including the Valiant Supply Agreement), guarantees and
warranties from third parties, listed on SCHEDULE 1.1.7 annexed hereto (the
"ASSIGNED CONTRACTS");
(b) The Assets shall include all assets, rights and properties of the
type described above that are acquired by Seller between the date hereof and the
Closing principally in connection with the Business, and shall exclude the
assets listed on Schedule 1.2 annexed hereto and, subject to Article 5, any
assets, rights and properties that are disposed of, sold or consumed after the
date hereof in the ordinary course of business.
1.2 ACCOUNTS AND WORK-IN-PROCESS NOT TRANSFERRED. All accounts receivable
arising from sales prior to the Closing (other than accounts receivable arising
from the Assigned Contracts in respect of sales of products to be delivered
after 60 days following Closing) and from the Work-In-Process (as defined below)
even if the invoices relating to such sales have not been issued (collectively,
the "ACCOUNTS"), all work-in-process existing as of the Closing (the
"WORK-IN-PROCESS"), and the assets listed on SCHEDULE 1.2 annexed hereto are
specifically excluded from the Assets and shall be retained by Seller (the
"EXCLUDED ASSETS"), provided that Seller shall be solely responsible for
collecting the Accounts, for disposing of or completing the manufacture of the
Work-In-Process in accordance with Article 5 and for filling the Customer Order
Backlog. Buyer shall grant to Seller an irrevocable and fully-paid up license
to use any Intellectual Property acquired by Buyer on the Closing Date in
connection with Seller's disposition and
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completion of its manufacture of the Work-In-Process following Closing in the
manner contemplated by this Agreement.
ARTICLE 2
CLOSING/DELIVERY OF ASSETS/PURCHASE PRICE/
ASSUMPTION OF LIABILITIES
2.1 THE CLOSING.
The consummation of the Transactions (the "CLOSING") will take place
at the offices of O'Melveny & Myers located at 400 South Hope Street, 15th
Floor, Los Angeles, California 90071, on the date specified in Section 2.2.2
below after the satisfaction or waiver of the conditions in Article 7.
2.2 SELECTION OF INVENTORY AND EQUIPMENT/PURCHASE PRICE/CLOSING DATE.
2.2.1 PURCHASE OF INVENTORY AND EQUIPMENT/DETERMINATION OF
INVENTORY PRICE AND EQUIPMENT PRICE. Seller and Buyer agree that the
obligation of Buyer to purchase any Inventory or Equipment, and the amount
payable by Buyer to Seller for the Inventory (the "INVENTORY PRICE") and
for the Equipment (the "EQUIPMENT PRICE") purchased by Buyer, shall be
determined in accordance with the procedures set forth in (A), (B) and (C)
below and such determinations shall be binding on Buyer and Seller for
purposes of determining the Inventory Price and the Equipment Price
components of the actual Purchase Price.
(A) INSPECTION OF INVENTORY AND EQUIPMENT. Pursuant to Section 5.1,
immediately following the date hereof, Seller shall permit Buyer and its
agents to have access to all of the Assets and shall provide Buyer all
financial information and records, in each case, only to the extent
necessary for Buyer to conduct a physical inspection, count and valuation
of the Inventory and the Equipment. On or before February 20, 1996, Buyer
and Seller shall complete a physical inspection, count and valuation of the
Inventory and the Equipment (the "PHYSICAL INSPECTION") and determine the
actual amount of the Inventory Price and the Equipment Price in accordance
with the terms and provisions of this Section 2.2.1. Notwithstanding
anything to the contrary contained herein, Buyer shall not be obligated to
purchase any Inventory or Equipment which is not in good condition and/or
repair, reasonable wear and tear excepted.
(B) PURCHASE OF INVENTORY/INVENTORY PRICE. During or within twenty
business days following the completion of the Physical Inspection, Buyer
and Seller shall determine the total amount of Inventory (other than
Inventory needed by Seller to fill the Customer Order Backlog) held by
Seller and available for purchase by Buyer (the "TOTAL INVENTORY"). Buyer
and Seller shall also determine, based on the sales history of Seller for
the 12-month period prior to the date of completion of the Physical
Inspection, the average amount of Inventory (by item) actually sold by
Seller in each month during such 12-month period (such average,
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the "PRIOR TWELVE-MONTH AVERAGE"); PROVIDED THAT, if, Buyer can demonstrate
in good faith that the Prior Twelve-Month Average is not indicative of
demand for the Inventory during the 24-month period following the date of
completion of the Physical Inspection, the Prior Twelve-Month Average
figure shall be adjusted downward to reflect the projected demand for the
Inventory during such 24-month period as mutually agreed upon between Buyer
and Seller (such adjusted average, the "ADJUSTED TWELVE-MONTH AVERAGE").
Based on the final determination by Buyer and Seller of the Total
Inventory, the Prior Twelve-Month Average and the Adjusted Twelve-Month
Average (if any), Buyer shall be obligated to purchase the lesser of (i)
the Total Inventory and (ii) an amount of Inventory (by item) equal to the
product of (x) the Prior Twelve-Month Average (if no adjustment is made to
the Prior Twelve-Month Average) or the Adjusted Twelve-Month Average (if an
adjustment is made to the Prior Twelve-Month Average) multiplied by (y)
twenty-four (24) (such product, the "TWENTY-FOUR MONTH INVENTORY"). The
Buyer shall have the option, but not the obligation, to purchase all or any
portion of the Total Inventory (if any) in excess of the Twenty-Four Month
Inventory. The Inventory Price for each item of Inventory required to be
purchased by Buyer pursuant to this Section 2.2.1 shall be determined in
the manner specified on SCHEDULE 2.2.1 annexed hereto.
(C) PURCHASE OF EQUIPMENT/EQUIPMENT PRICE. During or within twenty
business days following the Physical Inspection, Buyer shall provide Seller
a list of the particular items of Equipment Buyer elects to purchase and
Buyer shall be obligated to purchase only the items of Equipment set forth
on such list or as otherwise communicated in writing by Buyer to Seller.
The parties agree that the Equipment Price for each item of Equipment
selected by Buyer for purchase shall initially be equal to the "LIQUIDATION
VALUE" of such Equipment as set forth in that certain Appraisal, Heli-Coil
Fastening Systems Division, Shelter Rock Lane, Danbury, Connecticut 06810,
dated March 29, 1994, prepared by Roland Grenier, Appraiser, of Grenier
National, Inc. (the "APPRAISAL"). The purchase price of any gages and
thread roll dies listed on Schedule 1.1.3 but not included in the Appraisal
and which Buyer elects to purchase shall be agreed upon between Buyer and
Seller in good faith prior to Closing. Any form tools, taps, round dies,
welding punches and nests and miscellaneous other items of Equipment listed
on Schedule 1.1.3 but not included in the Appraisal and which Buyer elects
to purchase shall be deemed to be part of the other Equipment purchased by
Buyer and shall be included in the Equipment Price payable by Buyer for
such other Equipment. The Liquidation Value of any item of Equipment may,
however, be adjusted downward by an amount agreed upon between Buyer and
Seller during the completion of the Physical Inspection if the Physical
Inspection reveals that the physical condition of such item of Equipment is
such that the appraised Liquidation Value of such Equipment is materially
higher than the true liquidation value of such Equipment as agreed upon
between Buyer and Seller; PROVIDED that, notwithstanding anything to the
contrary contained herein, Buyer shall not be obligated to purchase any
such Equipment if Buyer and Seller cannot agree on the true liquidation
value of such Equipment; provided further that
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Seller may but shall not be obligated to sell any item of Equipment at less
than its Liquidation Value.
2.2.2 CLOSING DATE AND PURCHASE PRICE.
(a) Following the date of this Agreement, Seller shall maintain the
Assets in its possession in accordance with Article V. The Closing shall occur
within 10 days after the date on which the Inventory Price and the Equipment
Price are conclusively determined pursuant to Section 2.2.1, or such later date
(which shall not be beyond February 29, 1996) as the parties may agree in the
event that the conditions to the parties' obligations to close set forth in
Article 7 have not been satisfied within 10 days after the date that the
Inventory Price and Equipment Price are determined. At Closing, all equitable,
legal and beneficial title incidental to the ownership of the Assets (other than
the Equipment) shall pass to Buyer, and Seller shall promptly initiate in
accordance with Buyer's instructions the delivery to Buyer (via commercially
reasonable means of transportation designated by Buyer to a location designated
by Buyer) of the Inventory, the Equipment (other than the Retained Equipment (as
defined below)), and the other Assets purchased by Buyer. Equitable, legal and
beneficial title to the Equipment (including the Retained Equipment) shall pass
to Buyer upon delivery of the Equipment to a location in California designated
by Buyer; provided that Buyer shall be entitled to receive any insurance
proceeds in the event the Equipment is damaged, lost or destroyed during
transit. Because Seller shall retain possession of the Assets after Closing,
the risk of loss incidental to the ownership of the Assets shall pass to Buyer
upon delivery of the Assets to the carrier who will transport the Assets to
Buyer. Seller shall be entitled to retain for a period of up to 30 days from
the date of the Closing, any Equipment Seller reasonably determines it will need
in order to complete its manufacture and delivery of Customer Order Backlog (the
"RETAINED EQUIPMENT"). Seller shall deliver to Buyer, via commercially
reasonable means of transportation designated by Buyer to a location designated
by Buyer, the Retained Equipment immediately after the end of such 30 day
period. Seller shall deliver the Retained Equipment to Buyer in substantially
the same condition as the Retained Equipment existed on the Closing Date.
Seller shall bear all costs of crating and packaging the Assets for delivery to
Buyer and Buyer shall bear all costs of shipping and taking delivery of the
Assets (other than any taxes payable by Seller under Section 3.12).
(b) In consideration of the purchase and sale of the Assets and the
promises of Seller contained in this Agreement and the other Transaction
Documents, Buyer agrees to make the following payments to Seller:
(i) Buyer shall pay to Seller $100,000 on the date of this
Agreement (the "INITIAL PAYMENT");
(ii) On the Closing Date, Buyer shall pay to Seller the
Inventory Price for the Inventory purchased by Buyer pursuant to
Sections 2.2.1 and 2.2.2;
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(iii) On the Closing Date, Buyer shall pay to Seller the
Equipment Price for the Equipment (other than the Retained Equipment)
purchased by Buyer pursuant to Sections 2.2.1 and 2.2.2;
(iv) On the date on which Seller notifies Buyer that the
Retained Equipment has been packed and crated for delivery to Buyer,
Buyer shall pay to Seller the Equipment Price for the Retained
Equipment being delivered to Buyer;
(v) On the Closing Date, Buyer shall pay to Seller the sum of
$175,000 (a portion of which shall be distributed by Seller to
Intellectual Property Seller as payment for the Intellectual property
being sold by Intellectual Property Seller) in consideration for the
remaining Assets purchased by Buyer and the Non-Competition Agreement.
For purposes of this Agreement, the "Purchase Price" shall mean the
sum of (i) the Initial Payment, (ii) the Inventory Price, (iii) the Equipment
Price, and (iv) the sum of $175,000 payable by Buyer to Seller with respect to
the remaining Assets and the Non-Competition Agreement.
2.2.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Assets as follows:
Inventory: actual aggregate Inventory Price
Equipment: actual aggregate Equipment Price
Non Competition Agreement: $50,000
Names and Intellectual Property: $175,000
Remainder of Assets: $50,000
Buyer and Seller each agrees to file Internal Revenue Service Form
8594, and all federal, state, local and foreign tax returns, in accordance with
the above calculation and allocation of the Purchase Price.
2.3 PAYMENTS TO SELLER. On the date hereof, Buyer shall pay to Seller the
Initial Payment of $100,000 by wire transfer in immediately available funds to
Seller's account specified below. The Initial Payment shall be refundable to
Buyer in accordance with Section 9.10 of this Agreement. On the Closing date,
Buyer shall pay to Seller the Inventory Price for the Inventory purchased by
Buyer, the Equipment Price for the Equipment (other than the Retained Equipment)
purchased by Buyer and the $175,000 payment relating to the remaining Assets and
the Non-Competition Agreement by wire transfer to Seller's account specified
below. On the date specified in Section 2.2.2(b)(iv), Buyer shall pay to Seller
the Equipment Price for the Retained Equipment purchased by Buyer by wire
transfer in immediately available funds to Seller's account specified below
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or by certified check. For purposes of this Section 2.3, Seller's account
information is as follows:
Citibank New York
ABA 021000089
Account of: Emhart Industries Inc.
Account No: 4057-7082
2.4 INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing, Seller (and
Intellectual Property Seller in the case of clause (c) below) shall execute and
deliver or cause to be delivered to Buyer against Seller's receipt of the wire
transfer made in accordance with Section 2.3 at Closing (a) a Bill of Sale,
conveying all of the Assets other than the Retained Equipment (b) the Assignment
and Assumption Agreement, (c) the Assignment of Intellectual Property Rights and
specific assignments of each trademark and copyright included in the
Intellectual Property in a form recordable in the United States Patent and
Trademark Office, (d) the Non-Competition Agreement, (e) such other instrument
or instruments of transfer as shall be necessary or appropriate to transfer to
and vest in Buyer all of Seller's and Intellectual Property Seller's respective
rights, title and interests in and to the Assets, and (f) on or after the
Closing, such other documents as may be reasonably requested by Buyer in order
to carry out the Transactions. Seller and Intellectual Property Seller shall
use their reasonable best efforts to execute and deliver assignments of
Intellectual Property in a form recordable in each remaining jurisdiction
granting such rights on or before Closing; provided that if such assignments
cannot be delivered on or before Closing, Seller and Intellectual Property
Seller shall deliver such assignments promptly following Closing. Against the
receipt by Seller of the Equipment Price for the Retained Equipment, Seller
shall execute and deliver to Buyer a separate Bill of Sale conveying the
Retained Equipment.
2.5 ASSUMPTION OF CERTAIN LIABILITIES. On the Closing, Buyer shall
execute and deliver to Seller the Assignment and Assumption Agreement, pursuant
to which, subject to Section 2.6, Buyer shall, after the closing and subject to
Section 6.1, assume and agree to pay, perform and discharge when due, all the
liabilities and obligations of Seller arising solely out of the Valiant Supply
Agreement and the other Assigned Contracts (collectively, the "ASSUMED
LIABILITIES"), except any liability or obligation arising thereunder as a result
of a breach of any such Assigned Contract prior to Closing.
2.6 NON-ASSUMPTION OF LIABILITIES. Buyer is not assuming, and shall not
be deemed to have assumed any liability or obligation of Seller or any affiliate
of Seller, of any kind or nature, whether absolute, contingent, accrued or
otherwise, known or unknown, and whether arising before or after the date hereof
which is not set forth in Section 2.5 or is not otherwise expressly assumed in
any other provision of this Agreement.
2.7 SALES AND USE TAX. Buyer and Seller shall cooperate in preparing and
filing use and sales tax returns, if required, relating to, and Buyer shall pay
any and all sales, transfer or use tax due with regard to, the Transactions.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller (and Intellectual Property Seller with respect to Sections 3.1,
3.2, 3.3, 3.9 and 3.11) represents and warrants to Buyer as of the date hereof
and as of Closing as follows:
3.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Each of Seller and
Intellectual Property Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state in which it is incorporated and
is duly qualified to do business as a foreign corporation in the jurisdictions
in which Seller conducts the Business, except where the failure so to qualify
will not have a material adverse effect on the Assets or the Business. Seller
has all requisite corporate power and authority to own, operate and lease the
Assets, to conduct the Business, to execute and deliver the Transaction
Documents and to perform its obligations thereunder. Seller's principal
executive offices are located in the State of Connecticut and all of the
material tangible Assets are located in the County of Fairfield, State of
Connecticut.
3.2 AUTHORIZATION OF AGREEMENTS. The execution, delivery and performance
by Seller and Intellectual Property Seller of the Transaction Documents, and the
consummation by it of the Transactions, have been duly authorized by all
necessary corporate action by Seller and Intellectual Property Seller. This
Agreement has been, and each other Transaction Document will be at the date
thereof, duly executed and delivered by Seller and Intellectual Property Seller
and constitutes, or will, when executed and delivered, constitute, the legal,
valid and binding obligations of Seller, enforceable against Seller and
Intellectual Property Seller in accordance with their respective terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.3 EFFECT OF AGREEMENT. The execution, delivery and performance by
Seller and Intellectual Property Seller of the Transaction Documents, and the
consummation by each of them of the Transactions, will not violate the charter
documents or bylaws of Seller or Intellectual Property Seller or any law to
which Seller or Intellectual Property Seller is subject, or any judgment, award
or decree or any indenture, agreement or other instrument to which Seller or
Intellectual Property Seller is a party, or by which Seller or Intellectual
Property Seller or its Assets are bound, or conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under, any
such indenture, agreement or other instrument, or result in the creation or
imposition of any encumbrance or lien of any nature whatsoever upon any of its
Assets. No consents, approvals, authorizations, qualifications, waivers and
releases (collectively, the "APPROVALS"), including any Approvals of any
governmental entity, are required to be obtained by Seller to consummate the
transactions contemplated by this Agreement and the other Transaction Documents.
3.4 PERMITS. No Permit has been obtained by or issued to Seller or is
required in connection with the conduct of the Business.
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3.5 ASSIGNED CONTRACTS.
SCHEDULE 1.1.7 annexed hereto lists each Assigned Contract. Each
Assigned Contract is valid and subsisting; Seller has duly performed all its
obligations thereunder to the extent that such obligations to perform have
accrued; and no breach or default, alleged breach or default, or event which
would (with the passage of time, notice or both) constitute a breach or default
thereunder by Seller, or, to the best knowledge of Seller, any other party or
obligor with respect thereto, has occurred or as a result of the Transactions
will occur. True copies of the Assigned Contracts, including all amendments and
supplements thereto, have been delivered to Buyer. EXHIBIT E annexed hereto is
a true, complete and correct copy of the Valiant Supply Agreement.
3.6 SUFFICIENCY OF PROPERTY.
Seller has and shall transfer to Buyer on the date hereof good and
marketable title to, free of any encumbrances and liens, all of the Assets. The
Assets, together with the Inventory and Equipment not purchased by Buyer
pursuant to Section 2.2.1, constitute (A) all of the assets necessary for the
manufacture of the products of the Business in the manner in which such products
are currently manufactured by Seller, and (B) all of the assets of Seller used
to manufacture the products of the Business.
3.7 EQUIPMENT. SCHEDULE 1.1.3 annexed hereto is a schedule which is
complete and accurate in all material respects describing, and specifying the
location of, the Equipment. All Equipment taken as a whole and including any
Equipment not purchased by Buyer is adequate for the manufacture of the products
of the Business and is sufficient in quantity and quality for the manufacture of
the products of the Business in the manner in which such products are currently
manufactured. No Equipment is held under any lease, security agreement,
conditional sales contract, or other title retention or security arrangement or
is located other than in the possession of the Seller.
3.8 INVENTORY. Seller does not hold any Inventory on consignment and does
not have title to any Inventory in the possession of others other than
approximately $10,000 worth of raw materials held on consignment by Valiant Tool
Company, Inc.
3.9 LEGAL PROCEEDINGS.
There are no legal proceedings pending, or, to the best knowledge of
Seller, threatened, against or affecting Seller or the Assets that individually
or when aggregated with one or more other legal proceedings have or would
reasonably be expected to have a material adverse effect on the Business or on
Seller's ability to perform its obligations under the Transaction Documents.
3.10 COMPLIANCE WITH LAW.
Seller has conducted the Business in accordance with applicable laws.
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3.11 INTELLECTUAL PROPERTY.
SCHEDULE 1.1.4 annexed hereto lists any and all trademarks,
tradenames, and registered copyrights which presently are, or at any time in the
past 5 years have been used and is currently required by Seller or Intellectual
Property Seller in the operation of the Business and in which Seller or
Intellectual Property Seller has or has had an interest and the nature of such
interest. Except as set forth on SCHEDULE 1.1.4, to the knowledge of Seller or
Intellectual Property Seller, Seller or Intellectual Property Seller has
complete rights to and ownership of all Intellectual Property required for use
in connection with the Business, does not use any Intellectual Property by
license or consent of any other person or entity and the Intellectual Property
of Seller or Intellectual Property Seller used in connection with the Business
are fully assignable, free and clear of any encumbrances or liens. Neither
Seller nor Intellectual Property Seller has received any notice to the effect
(or is otherwise aware) that any Intellectual Property or any use by Seller or
Intellectual Property Seller thereof in connection with the Business conflicts
with or allegedly conflicts with or infringes the rights of any other person or
entity. Neither Seller nor Intellectual Property Seller owns or has a license
to use any registered or unregistered patents relating to the Business.
3.12 TAXES AND PRORATION.
(a) Seller has timely filed or will file (or, where permitted or
required, its respective direct or indirect parents have timely filed or will
file) all required tax returns and have paid all taxes of any kind applicable to
the Assets and the Business due for all periods ending on or before the Closing
Date. Seller has not elected to be treated as a consenting corporation under
Section 341(f) of the Code.
(b) Subject to Section 2.7, all ad valorem, property and similar
taxes in respect of the Assets and the Business attributable to the period prior
to the Closing, shall be prorated to the Closing, based on the latest available
applicable tax rates. Each party shall immediately pay on demand to the other
party the amount of any taxes paid or payable by the other party in excess of
the tax liability accruing to such party under this Sections 3.12 and Section
2.7.
3.13 INSURANCE.
Seller is currently insured with reputable insurers against all risks
with respect to the Assets and the Business normally insured against by
companies engaged in similar businesses. All insurance policies and bonds are
in full force and effect and shall remain in full force and effect until
delivery of the Assets to the carrier who will transport the Assets pursuant to
Section 2.2.2(a).
3.14 WORKER ADJUSTMENT AND RETRAINING NOTIFICATION.
Seller represents and warrants that Seller has complied with the
Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 ET.
SEQ. (the "WARN ACT") and has timely served all the notices required under the
WARN Act.
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Seller agrees to defend, indemnify and hold harmless Buyer from and against any
losses in connection with or arising out of or resulting from or incident to the
WARN Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as
of Closing as follows:
4.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
state in which it is incorporated. Buyer has all requisite corporate power and
authority to acquire, own, lease and operate the Assets, to conduct the Business
after the date hereof, to execute and deliver the Transaction Documents to which
it is a party and to perform its obligations thereunder.
4.2 AUTHORIZATION OF AGREEMENT. The execution, delivery and performance
by Buyer of the Transaction Documents to which it is a party, and the
consummation by it of the Transactions, have been duly authorized by all
necessary corporate action by Buyer. This Agreement has been, and each other
Transaction Document to which Buyer is a party will be at the date of delivery
thereof, duly executed and delivered by Buyer and constitute, or will, when
delivered, constitute, the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
4.3 EFFECT OF AGREEMENT. The execution, delivery and performance by Buyer
of the Transaction Documents to which it is a party, and the consummation by it
of the Transactions, will not violate the charter documents or bylaws of Buyer
or any law to which Buyer is subject, or any judgment, award or decree or any
material indenture, material agreement or other material instrument to which
Buyer is a party, or by which Buyer or its properties or assets are bound, or
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under, any such indenture, agreement or other
instrument, except to the extent the effect thereof will not be materially
adverse to Buyer's ability to fulfill its obligations under the Transaction
Documents to which it is a party.
4.4 FINANCING. Buyer has sufficient funds available to enable it to pay
the Purchase Price and otherwise satisfy its obligations under the terms of this
Agreement in a timely fashion.
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ARTICLE 5
COVENANTS WITH RESPECT TO
CONDUCT OF SELLER AND BUYER PRIOR TO CLOSING
5.1 ACCESS.
(a) From the date hereof to and including the Closing (the
"TRANSITION PERIOD"), Seller shall authorize and permit Buyer and its agents to
have access during such times as may be agreed to between Buyer and Seller, to
the Assets and all other information with respect to the Business as Buyer may
from time to time reasonably request, and to discuss the Business with Seller's
officers, employees, accountants, counsel, suppliers, and a representative
sampling of customers to be agreed upon between Buyer and Seller for the Buyer's
purpose of familiarizing itself with the Business, completing the Physical
Inspection obtaining any necessary Approvals for the Transactions. Prior to
Closing, Buyer shall not be entitled to make or retain any copies of books,
records or other materials and shall destroy any notes, analyses or other
written information it may produce based on or in connection with the access it
may be granted to Seller pursuant to this Agreement in the event that Closing
does not occur for any reason. Buyer shall arrange for the access provided
pursuant to this Section 5.1 (including the sampling of customers) only through
Robert McCue and any other person Mr. McCue may designate following the date of
this Agreement.
(b) Prior to Closing, Buyer and Buyer's partners, officers,
co-venturers, directors, officers, employees, affiliates, agents, advisors and
representatives (collectively, "BUYER'S REPRESENTATIVES") will keep all the
information (whether written or oral) pertaining to the Seller or the Seller's
Business which is furnished pursuant this Section 5.1 or has been furnished
prior to the date of this Agreement by the Seller or by any officer, employee,
affiliate, agent, advisor or representative of the Seller (collectively, the
"SELLER REPRESENTATIVES") confidential and will not without the Seller's prior
written consent, use or disclose any of such information in any manner
whatsoever. Nothing contained herein shall be construed to prevent the Buyer
from making disclosures that may be required by applicable law, regulation or
legal process. The terms of this Section 5.1 shall survive the termination of
this Agreement in the event that Closing does not occur.
5.2 MATERIAL ADVERSE CHANGES.
Seller will promptly notify Buyer of any event of which Seller obtains
knowledge which has had or might reasonably be expected to have a material
adverse effect on the Business or which if known as of the date hereof would
have been required to be disclosed to Buyer.
5.3 CONDUCT OF BUSINESS.
Prior to and for 30 days following Closing, Seller shall have the
right, power and authority to use the Assets and continue the Business solely
for the purpose of filling the Customer Order Backlog. To this end, Seller may
deliver to its customers
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any Inventory (for a period of 60 days following Closing) needed to fill the
Customer Order Backlog and may complete the build out of any Work-In-Process.
Any such Work-In-Process built out by Seller and constituting Inventory but not
needed by Seller to fill the Customer Order Backlog shall, if purchased by Buyer
pursuant to Section 2.2.1, be delivered to Buyer in accordance with Section
2.2.2(a). Seller covenants and agrees that it shall not without the prior
consent in writing of Buyer which may not be unreasonably withheld:
(a) conduct the Business in any manner except as provided in this
Article 5 and consistent with prudent industry practice;
(b) default in any of its obligations under any Assigned Contract or
take any action that would jeopardize the continuance of its material supplier
or customer relationships (it being understood that there cannot be any
assurance that material suppliers or customers will initiate relationships with
Buyer following Closing, PROVIDED that Seller shall reasonably cooperate with
Buyer to induce such material suppliers or customers to initiate and develop
relationships with Buyer following Closing);
(c) terminate, amend or fail to renew any existing insurance coverage
with respect to the Assets of the Business (it being understood that such
insurance coverage will not apply or be continued following delivery of the
Assets to the carrier who will transport the Assets to Buyer;
(d) sell, transfer, mortgage, encumber or otherwise dispose of any
Assets or any liabilities other than the Customer Order Backlog; or
(e) agree to or make any commitment to take any actions prohibited by
this Section 5.3.
5.4 PRESERVATION OF BUSINESS PRIOR TO DELIVERY DATE OF RETAINED EQUIPMENT.
Prior to the date of delivery of the Retained Equipment, Seller will
use its reasonable efforts to preserve the Business and to preserve the goodwill
of customers, suppliers and others having business relations with Seller and
shall fully cooperate with Buyer in making a smooth transition of the Assets and
the Business to the Buyer (it being understood that the terms of this covenant
shall not require Seller to pay money to any third parties other than in the
ordinary course of business and consistent with past practices).
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5.5 DISPOSAL OF INVENTORY AND EQUIPMENT NOT SELECTED FOR PURCHASE.
Any Inventory or Equipment not selected for purchase by Buyer pursuant
to Section 2.2.1 may be disposed of by Seller in any manner that Seller deems
appropriate and nothing contained herein (including the Non-Competition
Agreement) shall prevent Seller from selling or transferring such Inventory or
Equipment to a competitor of Seller or Buyer or any vendor, broker or other
person connected to or engaged in the Business or a similar business.
ARTICLE 6
ADDITIONAL CONTINUING COVENANTS
6.1 PERMITS AND APPROVALS.
Seller and Buyer each agree to cooperate and use their reasonable best
efforts to obtain all Approvals and Permits (if any) not obtained on or before
Closing pursuant to Section 7.2 that may be necessary or which may be reasonably
requested by Buyer to consummate the Transactions. Notwithstanding anything
herein to the contrary, the parties hereto acknowledge and agree that, Seller
will not assign to Buyer any Assigned Contract that by its terms requires, prior
to such assignment, the consent of any other contracting party thereto unless
such consent has been obtained prior to the Closing. With respect to each such
Assigned Contract not assigned at Closing, following Closing Seller shall
continue to deal with the other contracting parties to such Assigned Contract as
the prime contracting party, and Seller shall use its reasonable best efforts to
obtain the consent of all required parties to the assignment of such Assigned
Contract. Such Assigned Contract shall be promptly assigned by Seller to Buyer
after receipt of such consent after Closing. Notwithstanding the absence of any
such consent, Buyer shall be entitled to the benefits of such Assigned Contract
accruing after Closing; Buyer agrees to perform all of the obligations of Seller
to be performed under such Assigned Contract (other than any performance arising
as a result of a breach by Seller) after the Closing. Seller shall pay all
costs and expenses incurred by Buyer or Seller in obtaining any consents to the
assignment of the Assigned Contracts pursuant to this Section 6.1. Buyer shall
pay all costs and expenses incurred by Buyer or Seller in obtaining any Permits
or other Approvals (other than consents to the Assigned Contracts) pursuant to
this Section 6.1. Nothing contained in this Agreement shall require the Seller
to pay money to any third party in order to obtain any consent to the assignment
of an Assigned Contract.
6.2 NONDISCLOSURE OF PROPRIETARY DATA.
Neither Seller nor any of its representatives or affiliates shall, at
any time, make use of, divulge or otherwise disclose, directly or indirectly,
any trade secret or other proprietary data (including, but not limited to, any
customer list, record or financial information) concerning the Business;
PROVIDED that Seller may make use of any trade secret or other proprietary data
concerning the Business to the extent necessary to complete the build out of the
Work-In-Process as contemplated in Sections 1.2 and 5.3.
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In addition, neither Seller nor any of its representatives or affiliates shall
make use of, divulge or otherwise disclose, directly or indirectly, to any
person or entity other than Buyer, any confidential information concerning the
Business. The terms of this covenant shall not apply with respect to trade
secrets, proprietary data or information which (a) is or becomes generally
available to the public other than as a result of a disclosure by the Seller or
the Seller Representatives; or (b) becomes available to the Seller on a
nonconfidential basis from a source other than the Buyer or the Buyer
Representatives, provided, that the Seller has no reason to believe after due
inquiry with Buyer that such source is not entitled to disclose the information
to it or a nonconfidential basis. Furthermore, nothing contained herein shall
be construed to prevent the Seller from making disclosures that may be required
by applicable law, regulation or legal process.
6.3 ACCESS TO INFORMATION.
Buyer shall, from and after the Closing, not destroy or dispose of the
books and records of the Business relating to any period prior to the Closing
for a period of 7 years after the Closing without giving adequate notice to the
Seller of such pending disposal and offering Seller the right to copy or take
possession of such records. Buyer shall give Seller and Seller's employees,
counsel and accountants, full access upon reasonable notice during such times as
may be agreed to between Buyer and Seller, to all such records for any proper
purpose including, without limitation, in connection with the preparation of any
tax returns or financial statements or in connection with any judicial, quasi
judicial, administrative, tax audit or arbitration proceeding. Seller shall
arrange for the access provided pursuant to this Section 6.3 only through David
Werner or another authorized officer of Buyer.
ARTICLE 7
CONDITIONS OF PURCHASE
7.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be subject
to the following condition:
(a) NO ORDERS; LEGAL PROCEEDINGS. No law or order shall have been
enacted, entered, issued, promulgated or enforced by any governmental entity,
nor shall any legal proceedings have been instituted and remain pending or have
been threatened and remain which prohibits or restricts or would (if successful)
prohibit or restrict the Transactions.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing are subject to the
satisfaction or written waiver of each of the following conditions (it being
understood that a waiver of a Closing condition shall also constitute a waiver
of any post-Closing remedy (other than as provided in Section 9.8) that may
otherwise be available to Buyer in respect of the matter or matters which cause
the Closing condition not to be satisfied):
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(a) REPRESENTATIONS AND WARRANTIES AND COVENANTS OF SELLER. The
representations and warranties of Seller herein contained shall be true in all
material respects as of the Closing; Seller shall have in all material respects
performed all obligations and complied with all covenants and conditions
required by this Agreement to be performed or complied with by it at or prior to
the Closing, and Seller shall have delivered to Buyer a certificate of Seller in
form and substance satisfactory to Buyer, dated as of the Closing and signed by
its Chief Executive Officer or Chief Financial Officer to such effect.
(b) Buyer shall have received certified copies of resolutions passed
by the respective Boards of Directors of Seller and Intellectual Property Seller
authorizing and approving the Transactions and the Transaction Documents.
7.3 CONDITIONS TO OBLIGATIONS OF SELLER.
The obligations of Seller to effect the Closing are subject, at the
option of Seller, to the satisfaction or written waiver of the following
condition (it being understood that a waiver of a Closing condition shall also
constitute a waiver of any post-Closing remedy (other than as provided in
Section 9.8) that may otherwise be available to Seller in respect of the matter
or matters which cause the Closing condition not to be satisfied):
(a) REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties of Buyer herein contained shall be true in all material respects as
of the Closing; Buyer shall have in all material respects performed all
obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior to the Closing, and
Buyer shall have delivered to Seller a certificate of Buyer in form and
substance satisfactory to Seller, dated as of the Closing and signed by its
Chief Executive Officer or Chief Financial Officer, to such effect.
ARTICLE 8
INDEMNIFICATION
8.1 OBLIGATIONS OF SELLER.
Following Closing, Seller agrees to indemnify and hold harmless Buyer
and its directors, officers, employees, affiliates, agents and assigns during
the periods specified below from and against any and all losses or damages,
directly or indirectly, as a result of, or based upon or arising from:
(a) any breach of any representation, warranty or covenant of Seller
made in this Agreement, for the periods covered by Section 9.9;
(b) any claims (other than those arising under (a), (c) or (d) of
this Section 8.1) made after the Closing to the extent and only to the extent
that such claims relate (i) to the conduct of the Business before Closing or
(ii) to the build out of the
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Work-In-Process and the filling of the Customer Order Backlog as contemplated in
Sections 1.2 and 5.3, in each case, indefinitely;
(c) any products liability claims made prior to or after Closing to
the extent and only to the extent that such claims relate to products
manufactured and sold (even if not delivered) by Seller in the conduct of its
Business prior to Closing, indefinitely; or
(d) any recall of products effective on or after the date hereof
mandated as to Buyer by any federal, state, local or foreign governmental
authority to the extent and only to the extent that such recall relates to
products manufactured and sold (even if not delivered) by Seller prior to
Closing, indefinitely.
8.2 OBLIGATIONS OF BUYER.
Following Closing, Buyer agrees to indemnify and hold harmless Seller
and its directors, officers, employees, affiliates, agents and assigns during
the periods set forth below from and against any and all losses or damages,
directly or indirectly, as a result of, or based upon or arising from:
(a) any breach of any representation, warranty or covenant of Seller
made in this Agreement, for the periods covered by Section 9.9;
(b) any claims (other than those arising under (a), (c) or (d) of
this Section 8.2) made after the Closing with respect to the conduct of the
Business by Buyer following the Closing, indefinitely;
(c) any products liability claims made after Closing to the extent
and only to the extent that such claims relate to the products manufactured and
sold by Buyer in the conduct of the Business after the Closing, indefinitely;
(d) any recall of products effective on or after Closing mandated as
to Seller by any federal, state, local or foreign governmental authority to the
extent and only to the extent that such recall relates to products manufactured
and sold by Buyer after Closing, indefinitely; or
(e) any failure of Buyer to satisfy, perform, pay and discharge the
Assumed Liabilities to the extent assumed by Buyer pursuant to Section 2.5 and
the Assignment and Assumption Agreement.
8.3 NOTICE AND DEFENSE.
If Buyer or Seller is seeking indemnification (the party seeking
indemnification to be referred to as the "INDEMNIFIED PARTY") and desires to
make a claim against the other party for indemnification (the "INDEMNIFYING
PARTY") under this Article 8, the Indemnified Party shall, within 30 days after
the Indemnified Party becomes aware of a claim by notice or knowledge, notify
the Indemnifying Party in
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writing of any claim or demand as to which the Indemnified Party is entitled to
claim indemnification, the section under this Agreement with respect to which
such claim is being made and, to the extent known, the amount and circumstances
surrounding such claim. In the event the claim is a third party claim against
an Indemnified Party or involves a claim by or liability involving a
governmental authority, the Indemnifying Party shall have the right to employ
counsel of its choice to defend any such claim or demand; provided, however,
that (i) the Indemnified Party is kept fully informed of all developments and is
furnished copies of all relevant papers; (ii) the Indemnifying Party diligently
prosecutes the defense; and (iii) the Indemnified Party shall have the right to
participate, at its own undertaking and through counsel selected by it, in the
defense of any such claim. If the conditions of the foregoing proviso are not
met, or if the Indemnifying Party chooses not to control the defense, the
Indemnified Party shall assume and control the defense of such third party claim
or suit at the expense of the Indemnifying Party. The Indemnifying Party, or,
if the conditions to the foregoing proviso are not met, the Indemnified Party,
shall have the right to pay, compromise or settle any such third party claim
with the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
ARTICLE 9
GENERAL
9.1 AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may be
amended only by agreement in writing of all parties. No waiver of any provision
nor consent to any exception to the terms of this Agreement shall be effective
unless in writing and signed by the party to be bound and then only to the
specific purpose, extent and instance so provided.
9.2 SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this Agreement,
although schedules need not be attached to each copy of this Agreement. This
Agreement, together with such schedules and exhibits, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements and understandings of the parties in connection
therewith.
9.3 FURTHER ASSURANCES.
Each party shall execute and deliver both before and after the date
hereof such further certificates, agreements and other documents and take such
other actions as the other party may reasonably request to consummate or
implement the transactions contemplated hereby or to evidence such events or
matters. In furtherance and not in limitation of the foregoing, Seller and
Intellectual Property Seller shall execute and deliver any and all documents and
perform any actions (including the payment of money
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to third parties) necessary to release and terminate any liens of any type
whatsoever (other than liens created by Buyer) that may exist on any of the
Assets purchased by Buyer. Seller and Intellectual Property Seller shall also
execute and deliver any and all documents and perform any actions (other than
the payment of recording and filing fees) necessary to make any filings with any
governmental entity or office (foreign or domestic) necessary to record and/or
perfect Buyer's interests in the Assets.
9.4 GOVERNING LAW.
This Agreement and the legal relations between the parties shall be
governed by and construed in accordance with the laws of the State of California
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines except to the extent that certain matters are
preempted by federal law or are governed by the law of the jurisdiction of
incorporation of the respective parties.
9.5 COUNTERPARTS.
This Agreement and any amendment hereto or any other agreement (or
document) delivered pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement (or other document) and shall become
effective (unless otherwise provided therein) when one or more counterparts have
been signed by each party and delivered to the other party.
9.6 REMEDIES CUMULATIVE.
All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available. In
addition, Article 9 shall not be deemed to preclude or otherwise limit in any
way the exercise of any other rights or pursuit of other remedies for the breach
of this Agreement or with respect to any misrepresentation.
9.7 NOTICES.
Any notice or other communication hereunder must be given in writing
and (a) delivered in person, (b) transmitted by telex, telefax or
telecommunications mechanism, provided that any notice so given is also mailed
as provided in clause (c), or (c) mailed by certified or registered mail,
postage prepaid, receipt requested as follows:
IF TO BUYER, ADDRESSED TO:
Kaynar Technologies Inc.
800 South State College
Fullerton, California 92634-4001
Telephone: (714) 449-4304
Facsimile: (714) 680-3153
Attention: David A. Werner
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WITH A COPY TO:
O'Melveny & Myers
400 South Hope Street, 15th Floor
Los Angeles, California 90071
Telephone: (213) 669-6000
Facsimile: (213) 669-6407
Attention: C. James Levin and
Stuart Y. Kim
IF TO SELLER OR INTELLECTUAL PROPERTY SELLER, ADDRESSED TO:
Emhart Industries, Inc.
510 River Road
Shelton, Connecticut 06484
Telephone: (203) 925-4422
Facsimile: (203) 925-3255
Attention: Robert McCue
WITH A COPY TO:
Charles E. Fenton, Esquire
Vice President and General Counsel
The Black & Decker Corporation
701 East Joppa Road
Towson, Maryland 21286
AND
John B. Frisch, Esquire
Miles & Stockbridge, a Professional Corporation
10 Light Street
Baltimore, Maryland 21202
or to such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to) this
Section 9.7 and an appropriate answerback is received, (ii) if given by mail,
three days after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when actually received at such address.
9.8 EXPENSES AND ATTORNEYS FEES.
Seller and Buyer shall each pay their own expenses incident to the
negotiation, preparation and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the fees, expenses and
disbursements
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of their respective accountants and counsel; provided that Seller shall pay or
reimburse Buyer for any and all fees and disbursements of Buyer's counsel if
Closing does not occur as a result of Seller's refusal to consummate the Closing
despite the fact that all of the conditions to Closing set forth in Sections 7.1
and 7.3 have been satisfied. Buyer shall pay or reimburse Seller for any and
all fees and expenses of Seller's counsel if the Closing does not occur due to
Buyer's refusal to consummate the Closing despite the fact that all of the
conditions to Closing set forth in Sections 7.1 and 7.2 have been satisfied. In
the event of any legal proceedings for the breach of this Agreement by any
party, the prevailing party shall be entitled to reasonable attorney's fees,
costs and expenses incurred in such legal proceedings.
9.9 SURVIVAL.
The representations and warranties and agreements contained in or made
pursuant to this Agreement shall expire on the first anniversary of the Closing
except that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.3, 4.1, 4.2 and 4.3 shall survive the Closing and shall remain in full
force and effect indefinitely, (ii) the agreements made in Article 8 shall
continue for the periods set forth therein, (iii) this Section 9.9 shall be
continuing indefinitely and (iv) the provisions of Section 6.3 shall continue to
the periods specified therein.
9.10 SPECIFIC PERFORMANCE; RETURN OF INITIAL PAYMENT.
Seller acknowledges that, in view of the uniqueness of the Business
and the transactions contemplated by this Agreement, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement has
not been performed in accordance with its terms, and therefore agrees that Buyer
shall be entitled to specific enforcement of the terms hereof in addition to any
other remedy to which it may be entitled, at law or in equity. Notwithstanding
anything contained herein to the contrary, in the event that Closing does not
occur because the conditions to Buyer's obligations to proceed to Closing set
forth in Sections 7.1 and 7.2 have not been satisfied, or because Seller refuses
to consummate the Closing even though the conditions to Seller's obligations to
proceed to Closing set forth in Sections 7.1 and 7.3 have been satisfied, Seller
shall immediately refund the Initial Payment by wire transfer in immediately
available funds to Buyer and in that event Buyer shall not be entitled to any
other remedy (other than as provided in Section 9.8) or to otherwise proceed
against Seller.
9.11 BULK TRANSFER LAWS.
Seller and Buyer hereby waive compliance with any applicable bulk
transfer laws, including, but not limited to, the bulk transfer provisions of
the Uniform Commercial Code of any state, or any similar statute, with respect
to the transactions contemplated hereby. Seller agrees to indemnify, defend and
hold harmless Buyer from any and all losses and damages resulting from the
assertion of claims made against the Assets sold hereunder or against Buyer by
creditors of Seller under any bulk sales law with respect to liabilities and
obligations of Seller not assumed by Buyer hereunder.
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9.12 NO ASSIGNMENT.
Neither this Agreement nor any rights or obligations under it are
assignable by either party without the prior written consent of the other party.
9.13 HEADINGS.
The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.
ARTICLE 10
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires,
(a) the terms defined in this Article 11 have the meanings assigned
to them in this Article 11 and include the plural as well as the singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(e) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision.
As used in this Agreement and the Exhibits and Schedules delivered
pursuant to this Agreement, the following definitions shall apply.
"ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS" means an Assignment of
Intellectual Property Rights substantially in the form of Exhibit C hereto.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an Assignment and
Assumption Agreement substantially in the form of Exhibit A hereto.
"BILL OF SALE" means a Bill of Sale substantially in the form of
Exhibit B hereto.
22
<PAGE>
"BUSINESS" means the Seller's business of manufacturing, producing and
selling the "KELOX" product line of products as identified on Exhibit F annexed
hereto.
"CLOSING" has the meaning given thereto in Section 2.1.
"CONTRACT" means any contract, agreement, lease, license, sales order,
purchase order, or other legally binding commitment or instrument, whether or
not in writing.
"CUSTOMER ORDER BACKLOG" has the meaning given thereto in Section
1.1.2.
"GAAP" means generally accepted accounting principles in the United
States, as in effect on the date hereof.
"NON-COMPETITION AGREEMENT" means the Non-Competition Agreement
substantially in the form of Exhibit D hereto.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any governmental entity in connection with the Assets or the Business.
"TRANSACTION DOCUMENTS" means this Agreement, the Assignment and
Assumption Agreement, the Bill of Sale, Non-Competition Agreement and the
Assignment of Intellectual Property.
"TRANSACTIONS" means the transactions contemplated by the Transaction
Documents.
"VALIANT SUPPLY AGREEMENT" means the agreement attached hereto as
Exhibit E.
23
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the day and year
first above written.
BUYER
KAYNAR TECHNOLOGIES INC.
By: /s/ David A. Werner
--------------------------
Name: David A. Werner
Title: Vice President
SELLER
EMHART INDUSTRIES, INC.
By: /s/ Charles E. Fenton
--------------------------
Name: Charles E. Fenton
Title: Vice President
INTELLECTUAL PROPERTY SELLER
EMHART, INC.
By: /s/ Charles E. Fenton
--------------------------
Name: Charles E. Fenton
Title: Vice President
24
<PAGE>
DATED 9 August 1996
- -------------------------------------------------------------------------------
RECOIL PTY LTD
-and-
RECOIL INC.
- and -
ADVENT LIMITED
-and-
AUSTRALIAN PACIFIC TECHNOLOGY LIMITED
-and-
WESTERN PACIFIC INVESTMENT COMPANY LIMITED
-and-
MR B. PRICE
-and-
B. PRICE HOLDINGS PTY LTD
-and-
LENARDE PTY LTD
-and-
KAYNAR TECHNOLOGIES INC.
-and-
RCL PTY
-------------------------------------------------------------------
AUSTRALIAN ASSET SALE AGREEMENT
-------------------------------------------------------------------
I do hereby certify that this is a true and complete copy of the Australian
Asset Sale Agreement of 148 pages.
/s/ Tom Rowan 9/8/96
Thomas J Rowan
600 Bourke Street, MELBOURNE
A Solicitor holding a current
Practising Certificate under
the Legal Profession Practice Act 1958.
[LETTERHEAD]
<PAGE>
INDEX
CLAUSE PAGE
- ------ ----
NO.
---
1. DEFINITIONS AND INTERPRETATION 2
2. SALE OF BUSINESS ASSETS 13
3. CONSIDERATION 14
4. CONDITIONS PRECEDENT 17
5. STOCKTAKE 19
6. COMPLETION 19
7. ACCOUNTS, NET TANGIBLE ASSETS AND
OTHER MATTERS 23
8. TRANSFERRING EMPLOYEES 25
9. BUSINESS CONTRACTS AND TRANSFERRED
LEASES 26
9A. BUSINESS CONTRACTS 27
9B. TRANSFERRED LEASES 28
10. BUSINESS LIABILITIES AND INDEMNITIES
BY THE PURCHASER AND THE VENDORS 28
11. CHANGE OF NAME 30
12. RESTRAINT 30
13. BOOK DEBTS 32
14. RIGHTS AND OBLIGATIONS PENDING
COMPLETION 33
15. KAYNAR GUARANTEE AND INDEMNITY 34
16. WARRANTIES 36
17. SUPERANNUATION 39
18. ACCESS TO BUSINESS RECORDS 39
19. JOINT AND SEVERAL LIABILITY 39
20. CONFIDENTIALITY 39
21. MOREN LITIGATION 40
22. GENERAL 41
23. ENVIRONMENTAL REPORT 44
<PAGE>
INDEX CONT'D
SCHEDULE 1 - Business Contracts
SCHEDULE 2 - Business Records
SCHEDULE 3 - Industrial and
Intellectual Property
SCHEDULE 4 - Plant & Equipment
SCHEDULE 5 - Subsidiaries and
Subsidiary Shares
SCHEDULE 6 - Transferring
Employees
SCHEDULE 7 - Transferred Leases
SCHEDULE 8 - Industrial and
Intellectual Property
Deed of Assignment
SCHEDULE 9 - ITES Loan
SCHEDULE 10 - Warranted Subsidiary
Matters
SCHEDULE 11 - Warranties and
Representations
SCHEDULE 12 - Due Diligence Disclosure
SCHEDULE 13 - Superannuation Funds
SCHEDULE 14 - Book Debt Deed of
Assignment and Notice
<PAGE>
ASSET SALE AGREEMENT
THIS AGREEMENT is made the 9th day of August 1996.
BETWEEN
RECOIL PTY LTD ACN 006 664 731 of 20 Stamford Road, Oakleigh, Victoria
("the Company")
AND
RECOIL INC of 1051 Third Avenue, SW, Indianapolis, Indiana, United States
("the US Subsidiary")
AND
ADVENT LIMITED ACN 006 509 708 of 6th Floor, 410 Collins Street, Melbourne
("AL")
AND
AUSTRALIAN PACIFIC TECHNOLOGY LIMITED ACN 006 212 764 of 6th Floor, 410
Collins Street, Melbourne ("APT")
AND
WESTERN PACIFIC INVESTMENT COMPANY LIMITED ACN 006 254 502 of 6th Floor,
410 Collins Street, Melbourne ("WPI")
(and AL, APT and WPI are called "the Advent Group")
AND
MR B. PRICE of 59 Glyndon Road, Camberwell, Victoria ("Mr Price")
AND
B. PRICE HOLDINGS PTY LTD ACN 073 779 352 of 59 Glyndon Road, Camberwell,
Victoria ("BPH");
AND
LENARDE PTY LTD 005 846 597 of 59 Glyndon Road, Camberwell, Victoria
("Lenarde")
(and Mr Price, BPH and Lenarde are called "the Price Interests")
(and the Advent Group, BPH and Lenarde are called "the Shareholder
Vendors")
(and the Company and the Shareholder Vendors are called "the Vendors")
AND
KAYNAR TECHNOLOGIES INC. of 800 State College Boulevard, Fullerton,
California, United States ("Kaynar")
AND
RCL PTY ACN 073 750 428 of 20 Stamford Road, Oakleigh, Victoria ("the
Purchaser")
<PAGE>
- 2 -
WHEREAS:
1. The Company:
(a) Employs the Business Assets in the Australian Business in Australia;
and
(b) On or before the Effective Date will sell, or otherwise transfer legal
and beneficial interest in the Business Assets, other than the Book
Debts, the ITES Loan, the Stock, the Subsidiary Shares and the
Transferred Leases to the Shareholder Vendors; and
(c) Will continue to own the Book Debts, ITES Loan, the Stock, Subsidiary
Shares and Transferred Leases.
B. The US Subsidiary has employed the US Assets in the US Business in the
United States of America.
C. The Vendors have agreed to sell to the Purchaser, and the Purchaser has
agreed to purchase from the Vendors, all the Business Assets other than the
Subsidiary Shares, upon and subject to the terms and conditions set out
herein.
D. The Vendors have agreed to sell, and Kaynar has agreed to purchase (or
nominate another to purchase), the Subsidiary Shares.
E. The US Subsidiary has agreed to sell, and Kaynar has agreed to purchase
from the US Subsidiary, the US Business Assets upon the terms and
conditions of the US Asset Sale Agreement.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following
terms have the following meanings:
(a) "Accounts" means the consolidated audited balance sheet and the profit
and loss statement and accompanying notes of the Company and its
Subsidiaries at the Effective Date prepared in accordance with
Australian Accounting Principles;
(b) "Australian Accounting Principles" means:
(i) The applicable accounting standards and practices required by the
Corporations Law;
<PAGE>
- 3 -
(ii) The accounting standards and practices issued by or on behalf of
the Institute of Chartered Accountants in Australia or Australian
Society of Certified Practising Accountants, and any successor to
either of those bodies; and
(iii) If there are no explicit accounting standards and practices,
those generally accepted in Australia;
(c) "Australian Business" means the business of manufacturing and selling
helically wound threads and thread insert kits carried on by the
Company in Australia, the assets of which will be owned by the Vendors
in the manner described in the Recitals to this Agreement;
(d) "Bank Charge" means the fixed and floating charge given by the Company
to National Australia Bank Limited registered with the Australian
Securities Commission and numbered 92103 securing a maximum liability
of approximately $1,100,000;
(e) "BBB Rate" means the rate expressed as a percentage per annum equal to
the average of the bank bill buying rates which appear on the page
designated as BBSW on the Reuters Monitor System or such other page as
may replace the BBSW page or such other system for the purpose of
displaying the bank bill buying rate for bills of exchange having a
term of 90 days, at or about 10.30am on the day for determining the
BBB Rate;
(eA) "Book Debt Amount" means $1,410,291;
(f) "Book Debts" means any debt due to the Company at the Effective Date
or to become due to it at some future time on account of the
Australian Business carried on by the Company at any time up to the
Effective Date including any amounts owed to the Company by the
Subsidiaries, other than the US Subsidiary;
(h) "Business Assets" means each of the:
(i) Book Debts;
(ii) Business Contracts;
(iii) Business Records;
(iv) Industrial and Intellectual Property;
(v) Licences;
(vi) Plant and Equipment;
<PAGE>
- 4 -
(vii) Stationery and Supplies;
(viii) Stock;
(ix) Subsidiary Shares;
(x) Transferred Leases;
and all other assets directly associated with and of benefit to the
ongoing Australian Business, other than the Excluded Assets;
(i) "Business Contracts" means each of the contracts entered into by the
Company and others in the Australian Business including, without
limitation, those more particularly described in Schedule 1, all of
which are owned by the Vendors;
(j) "Business Day" means any day on which the majority of banks carrying
on business in the cities of Melbourne and Los Angeles are open for
business;
(k) "Business Liabilities" means:
(i) The actual liabilities of the Vendors relating to the Australian
Business as at the Effective Date disclosed in the Accounts; and
(ii) Any Claim of a Transferring Employee for or in respect of
severance or termination of employment the subject of the
indemnity from the Purchaser under clause 8.7,
but excluding the Excluded Liabilities;
(m) "Business Records" means each of the records of the Company including,
without limitation, those more particularly described in Schedule 2,
all of which are owned by the Vendors;
(n) "Claim" means any claim or cause of action in contract, tort, under
statute or otherwise;
(o) "Company's Auditor" means Bird Cameron Partners;
(p) "Completion Date" means the first Business Day following the Effective
Date or such other date as the parties may agree;
<PAGE>
- 5 -
(q) "Completion Statement" means the statements prepared in accordance
with clause 7 as at the Effective Date and Retention Date, as the case
may be;
(qA) "Composite Purchase Price" means $14,700,000;
(r) "Effective Date" means the date notified under clause 6.2 or such
other date as the parties may agree;
(s) "Encumbrance" means a mortgage, Claim, security interest, title
defect, charge, pledge, lien, option, restriction as to transfer, use
or possession, easement, subordination to any right of any other
person, or other encumbrance, but does not include a lien arising as a
matter of law or title retention in respect of Stock which lien or
title retention will be discharged by payment of the Business
Liabilities to be assumed by the Purchaser and includes the Bank
Charge;
(t) "Excluded Assets" means each of the following assets of the Vendors:
(i) Any amount owed by the US Subsidiary to the Company disclosed in
the Accounts;
(ii) Any future income tax benefit of the Company;
(iii) Any amount owed or paid by, or any consideration provided by, any
of the:
A. Shareholder Vendors to the Company in relation to the
acquisition by them of the Business Assets including, but
not limited to, the assumption by them of any Business
Liabilities or any other liability of the Company; and
B. Transferring Employees to the Company in relation to the
exercise of any option over shares in the capital of the
Company;
(iv) The shares in the French Subsidiary held by Recoil (Europe) Ltd;
and
(v) Any amount owed or paid to the Company and not disclosed in the
Accounts;
(u) "Excluded Liabilities" means each of the following liabilities of the
Vendors and whether existing on, or after, the Effective Date and
whether asserted or unasserted, liquidated or unliquidated, contingent
or non-contingent:
<PAGE>
- 6 -
(i) Any cost and expense incurred by the Vendors and any liability of
the Vendors arising in relation to:
A. This Agreement;
B. The acquisition by the Shareholder Vendors of the Business
Assets and the assumption by them of the Business
Liabilities and any other liability of the Company;
C. The liquidation of the US Subsidiary;
D. The French Subsidiary, including but not limited to any
liability arising in relation to the liquidation of that
company;
E. The acquisition by the Company of any share or option over
any share in its capital held by any of the Price Interests
or any employee of the Company,
including, but not limited to, the cost of the Company's Auditor
of performing any function under clause 7, any legal fees,
accountants' fees, tax advisers' fees, other consultants' fees,
stamp duty and Taxes and whether of an income or capital nature
or otherwise;
(ii) Any liability of the Company to pay income taxes under the Income
Tax Assessment Act 1936 (Commonwealth of Australia) and the US
Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder;
(iii) Any amount owed by the Company to Mr Paul Dowling or to AL, where
AL has paid any such amount to Mr Dowling on the Company's
behalf;
(iv) Any amount owed by the Company to Mr Ken Jones in respect of the
sale by the Vendors of the Business Assets to the Purchaser and
Kaynar; and
(v) Any liability not disclosed in the Accounts resulting from or
under any employee benefit plan of the Company or the
Subsidiaries, whether to current employees, former employees,
retired employees or other persons entitled to receive payments
under such plans or the beneficiaries of any of the foregoing;
(vi) Subject to clause 21, any liability not disclosed in the Accounts
with respect to Claims, investigations or arbitration or other
litigation
<PAGE>
- 7 -
pending on the Effective Date or which arises on or after the
Effective Date as a result of events occurring prior to the
Effective Date;
(vii) Subject to clause 8, any liability arising out of Claims by
Transferring Employees which are not fully indemnified under
indemnity compensation insurance pending on the Effective Date
(or which arise after the Effective Date but are based on facts
or circumstances occurring prior to the Effective Date),
including but not limited to Claims for unpaid salary and wages,
bonuses, violation of any industrial award or workplace or
employment or collective agreement, unfair work practices, working
condition, violation of equal opportunity or race discrimination
legislation, Taxes, violation of workplace health and safety
legislation or sick leave entitlements;
(viii) Any liability arising from Claims brought by former employees of
the Company who are not Transferring Employees;
(ix) Any product liability Claims arising from or related to any
product manufactured by the Company prior to the Effective Date,
subject to the Purchaser maintaining product liability insurance
at least equivalent to that maintained by the Vendors as at the
Effective Date;
(x) Any liability in respect of a violation or contravention by the
Vendors or any of their directors or officers of any
environmental law or any licences, approvals, consents,
permission or permits issued under any environmental law;
(xi) For the period from the Effective Date to:
A. 31 July 2000, in the case of the property at 20 Stamford
Road, Oakleigh, Victoria, 3166, Australia;
B. 28 September 1997, in the case of the property at Unit 7,
Fallings Park Industrial Estate, Park Lane, Wolverhampton,
WV109QE, United Kingdom; and
C. 30 April 1997, in the case of the property at Langestraat
103, B9300, Aalst, Belgium,
any liability as a result of events occurring prior to the
Effective Date in respect of any pollution, contamination or any
hazardous or toxic spill, leak or discharge of whatever nature
<PAGE>
- 8 -
affecting those properties including any liability:
D. Under any notice, direction or order issued by any
government or semi-government body to clean up,
decontaminate or take remedial action to make good under any
environmental law;
E. Arising from any Claim concerning property damage or
personal injury or death;
F. In respect of the generation, treatment, storage, release or
disposal or any hazardous material; or
G. As a result of the property listed in Part A of Schedule 7
being located on a landfill site,
but excluding any liability as a result of subsidence on any of
the properties referred to in this paragraph (xi);
(xii) Any liability in connection with any violation or alleged
violation of any law by the Vendors;
(xiii) For a period of two years from the Completion Date, in respect of
any Claims relating to the infringement by the Vendors of third
party rights and the infringement of such rights by the Purchaser
or Kaynar as a result of the use by the Purchaser or Kaynar of
the Trademarks described in Schedule 3; and
(xiv) Any other liability which is not a Business Liability;
(vA) "French Subsidiary" means Recoil SARL;
(v) "Industrial and Intellectual Property" means all industrial and
intellectual property of the Australian Business, including, without
limitation:
(i) All patents and patent applications used in connection with the
Australian Business, all of which are owned by the Vendors;
(ii) All copyright, industrial designs, inventions, trade secrets,
confidential information and knowhow and all other intellectual
property used in connection with the Australian Business, all of
which, registered or not, are owned by the Vendors; and
<PAGE>
- 9 -
(iii) All customer lists,
and including all rights to use the Trademarks, research and
development, and all of the goodwill of the Australian Business
including the right for the Purchaser to represent itself as carrying
on the Australian Business as the successor of the Vendors;
(vA) "Initial Instalment" means the difference between:
(i) The Interim Purchase Price; and
(ii) The sum of the Book Debt Amount and the Retention Amount;
(vB) "Interim Purchase Price" means the difference between:
(i) $14,700,000; and
(ii) The sum of the Subsidiary Share Price and the US Purchase Price;
(w) "ITES Loan" means the loan made by The Australian Trade Commission to
the Company under the International Trade Enhancement Scheme under an
agreement of 17 March 1994, and which is owned by the Company;
(wA) "Licences" means all licences, permits, consents and approvals from
government and non-government bodies;
(x) "Loss" means any damage, loss, cost, Claim, liability, charge,
expense, diminution in value or deficiency of any kind or character
(including loss of property or expected profit);
(y) "Net Assets of the Company" means the difference between:
(i) The total assets; and
(ii) The total liabilities,
of the Company and its Subsidiaries determined on a consolidated basis
at the Effective Date, as if the transactions set out in recital A(b)
had not taken place, in accordance with clause 7;
(z) "Plant and Equipment" means all plant and equipment used in the
Australian Business on the Effective Date including, without
limitation and subject to clause 6.4, the plant and equipment
described in Schedule 4, including all plant and equipment under
construction, all of which is owned by the Vendors;
<PAGE>
- 10 -
(zA) "Purchase Price" means:
(i) The sum of the Interim Purchase Price and the amount of that
excess referred to in clause 3.5(a)(i); or
(ii) The difference between the Interim Purchase Price and that amount
referred to in clause 3.5(b)(i),
(as the case may be);
(aa) "Purchaser's Auditor" means Arthur Andersen;
(aaA) "Purchaser's Stakeholder" means Corrs Chambers Westgarth, solicitors,
of 600 Bourke Street, Melbourne;
(bb) "R & D Grant" means the grant made by the Industry Research and
Development Board to the Company under an agreement dated 4 February
1992;
(bbA) "Retention Amount" means $1,000,000;
(cc) "Retention Date" means the first Business Day which falls after 45
days after the Completion Date, or such other date as the parties may
agree;
(dd) "Stationery and Supplies" means all stationery and supplies used in
the Australian Business on the Effective Date including, without
limitation, advertising material, samples, catalogues, brochures,
consumables, spare parts and tools all of which are owned by the
Vendors;
(ee) "Stock" means the stock used in the Australian Business on the
Effective Date, including without limitation, stock in transit, raw
materials, components, work in progress, finished goods, partly
finished goods, spare parts, consumables, pallets and packaging
material, all of which are owned by the Company;
(ff) "Subsidiaries" means the companies described in Schedule 5 as such;
(gg) "Subsidiary Shares" means the shares, described in Schedule 5, in the
Subsidiaries, other than the US Subsidiary, all of which are owned by
the Company;
(ggA)"Subsidiary Shares Price" means the price paid by Kaynar for the
purchase of the Subsidiary Shares, which amount will be the amount
shown in Schedule 5;
<PAGE>
- 11 -
(hh) "Superannuation Funds" means the superannuation funds set out in
Schedule 13;
(hhA) "Tax" and "Taxes" means:
(i) All taxes levied, imposed or assessed under the Income Tax
Assessment Act 1936 (Commonwealth of Australia) or any other
statute, ordinance or law, in Australia;
(ii) All taxes levied, imposed or assessed under the tax legislation,
or any other statute, ordinance or law in the United States of
America, the United Kingdom, Belgium or elsewhere; and
(iii) Taxes in the nature of sales tax, excise, consumption tax, value
added tax, payroll tax, group tax, pay as you earn tax,
superannuation contributions, workers' compensation
contributions, social security, pension fund and other obligatory
contributions undistributed profits tax, fringe benefits tax,
recoupment tax, withholding tax, land tax, water rates, municipal
rates, stamp duties, gift duties or other foreign, national,
state, territorial, Commonwealth, local or municipal taxes,
charges or impositions levied, imposed or collected by any
government body in Australia, the United States of America, the
United Kingdom, Belgium, or elsewhere,
together with any additional tax, interest, penalty, charge, fee or
other amount of any kind assessed, charged or imposed and any loss in
connection with the determination, settlement or litigation of any Tax
liability;
(ii) "Trademarks" means all of the trademarks of the Australian Business
including, without limitation:
(i) Each and every trademark which is registered or for which an
application is pending;
(ii) Such unregistered rights as may exist through use, including
trademarks, trade dress, brand names, logos and other names and
slogans embodying goodwill associated with any product; and
(iii) Any goodwill incidental to such trademark used by or on behalf of
the Vendors in relation to the Australian Business including,
without limitation, the trademarks described in Schedule 3;
<PAGE>
- 12 -
(jj) "Transferred Leases" means the leases of the real property described
in Part A of Schedule 7 and chattels described in Part B of Schedule 7
entered into by the Company and others and which are owned by the
Company;
(kk) "Transferring Employees" means, subject to clause 6.4, the persons
more particularly described in Schedule 6;
(ll) "US Asset Sale Agreement" means the agreement between Kaynar and the
US Subsidiary bearing or intended to bear even date, relating to the
sale by the US Subsidiary to Kaynar of the US Assets.
(mm) "US Assets" means the assets to be sold by the US Subsidiary to Kaynar
under the US Asset Sale Agreement;
(nn) "US Business" means the business of selling helically wound thread and
thread insert kits carried on by the US Subsidiary in the United
States of America; and
(oo) "US Purchase Price" means the amount to be paid to the US Subsidiary
by Kaynar under the US Asset Sale Agreement being $1,875,000.
(pp) "Vendor's Stakeholder" means Norton Smith Gledhill, solicitors, of
level 23, 459 Collins Street, Melbourne.
1.2 In this Agreement, unless the context otherwise requires:
(a) Words importing one gender shall include the other and neuter genders;
(b) Persons shall include corporations and vice versa;
(c) The singular number shall include the plural number and vice versa;
(d) A reference to any statute or regulation or other law includes a
reference to that statute, regulation or other law as modified,
amended, or re-enacted from time to time, and any reference to any
provision thereof is to that provision as so modified, amended or
re-enacted; and
(e) A reference to $ or dollars is a reference to the lawful currency of
Australia.
1.3 Headings used herein are inserted for ease of reference and shall not
affect in any way the meaning of this Agreement.
<PAGE>
- 13 -
1.4 References to clauses, sub-clauses and paragraphs are references to
clauses, sub-clauses and paragraphs of this Agreement and a reference to
this Agreement includes the Schedules to this Agreement.
1.5 In this Agreement, unless the contrary intention requires, references to
the ownership sale, receipt of payment for or any other treatment of the
Business Assets by the Vendors shall be construed as if the Business Assets
are owned by the Vendors in the manner described in Recital A to this
Agreement.
2. SALE OF BUSINESS ASSETS
2.1 On the Completion Date, but with effect from the Effective Date:
(a) The Vendors, as legal and beneficial owners of the Business Assets
respectively owned by them as described in this Agreement, hereby
sell, assign and transfer, free from all Encumbrances:
(i) The Business Assets, other than the Subsidiary Shares, to the
Purchaser; and
(ii) The Subsidiary Shares to Kaynar or its nominee; and
(b) The Purchaser hereby purchases and has assigned and transferred from
the Vendors the Business Assets, other than the Subsidiary Shares,
respectively owned by them; and
(c) Kaynar hereby purchases and has assigned and transferred from the
Company the Subsidiary Shares,
upon and subject to the terms and conditions of this Agreement, it being
the intention of the parties that the Purchaser shall become the legal and
beneficial owner of the Business Assets other than the Subsidiary Shares
and Kaynar or its nominee shall become the legal and beneficial owner of
the Subsidiary Shares, in each case on and from the Effective Date, and be
entitled to the rights and obligations in relation to the Business Assets
from the Effective Date.
2.2 Kaynar shall have the right two (2) Business Days before the Completion
Date to nominate to the Company in writing a person other than itself as
the purchaser of all or any of the Subsidiary Shares under this Agreement,
and the person so nominated may purchase the Subsidiary Shares on the terms
and conditions of this Agreement.
<PAGE>
- 14 -
2.3 The liability of Kaynar to pay the amount due under this Agreement for the
sale and purchase of the Subsidiary Shares shall not in any way be affected
by the exercise of its right to nominate some other person to purchase the
Subsidiary Shares.
3. CONSIDERATION
3.1 The consideration for the sale and purchase of the Business Assets shall be
the:
(a) Assumption by the Purchaser of the Business Liabilities on the
Completion Date but with effect from the Effective Date;
(b) Payment by the Purchaser of the Purchase Price under this clause 3;
and
(c) Payment by Kaynar of the Subsidiary Shares Price under this clause 3.
3.2 The Purchase Price shall be applied as follows:
(a) Book Debts, the face value of the Book Debts shown in the Accounts
less all proper provisions in the Accounts for bad and doubtful debts;
(b) Business Records, $1.00;
(c) Plant and Equipment, $3,600,000;
(d) Stock, the amount determined under clause 5;
(e) Stationery and Supplies, $1.00;
(f) Transferred Leases, $1.00;
(g) Licences and all other Business Assets, $1.00; and
(h) Business Contracts and Industrial and Intellectual Property, the
balance,
and the Vendors, Kaynar and the Purchaser each agree to file U.S. Internal
Revenue Service Form 8594, and all federal, state, local and foreign tax
returns, in accordance with the above calculation and allocation of the
Purchase Price.
3.3 (a) On the Completion Date the Purchaser shall pay the Interim Purchase
Price by paying on that date the:
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(i) A. Book Debt Amount; and
B. Retention Amount,
to the Purchaser's Stakeholder, to be held in an interest bearing
trust account for the benefit of the Purchaser and the Vendors and to
be paid in accordance with this Agreement, and
(ii) The Initial Instalment to the Vendors' Stakeholder.
(b) The Purchaser shall, not later than eighteen (18) days after the
Completion Date, procure the Purchaser's Stakeholder to pay the Book
Debt Amount and any interest earned on the Book Debt Amount to the
Vendors' Stakeholder.
(c) The Composite Purchase Price shall be adjusted, and any amounts
payable under clause 3.5 (including interest earned on the Retention
Amount) which are held by the Purchaser's Stakeholder shall be paid in
accordance with clause 3.5 and as follows, if the amount due under
clause 3.5 is:
(i) Agreed under clause 7 before the Retention Date, the Purchaser
shall procure the Purchaser's Stakeholder to pay the amount no
later than the Retention Date;
(ii) Not agreed under clause 7 before the Retention Date, the
Purchaser shall:
A. Procure the Purchaser's Stakeholder to pay the amount which
is not in dispute under clause 7 no later than the Retention
Date; and
B. Procure the Purchaser's Stakeholder to continue to hold any
amount in dispute under clause 7 until the dispute is
resolved by the independent chartered accountant appointed
under clause 7.4. Upon resolution of the dispute by the
independent chartered accountant, the Purchaser shall
procure the Purchaser's Stakeholder to forthwith pay the
amounts in accordance with the independent chartered
accountant's determination.
3.4 Kaynar shall pay the Subsidiary Shares Price to the Vendors' Stakeholder on
the Completion Date.
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3.5 If the Net Assets of the Company:
(a) Exceed $3,697,368 by more than $100,000:
(i) The Composite Purchase Price shall be adjusted by increasing the
Interim Purchase Price by the amount by which the Net Assets of
the Company exceed $3,697,368; ("that excess"); and
(ii) The Purchaser shall pay that excess and procure that the
Purchaser's Stakeholder pay the Retention Amount, and any
interest accrued on the Retention Amount, to the Vendors'
Stakeholder; or
(b) Are less than $3,697,368 by more than $100,000:
(i) The Composite Purchase Price shall be adjusted by reducing the
Interim Purchase Price by the amount by which the Net Assets of
the Company is less than $3,697,368 ("that amount"); and
(ii) If that amount is less than the Retention Amount:
A. The Purchaser shall procure that the Purchaser's Stakeholder
pay the difference between the Retention Amount and that
amount ("the net amount") and any interest accrued on the
net amount to the Vendors' Stakeholder; and
B. The Purchaser shall be entitled to the balance of the
Retention Amount and any interest accrued on that balance;
and
(iii) If that amount is greater than or equal to the Retention Amount:
A. The Vendors shall, on the Retention Date, pay the difference
between that amount and the Retention Amount to the
Purchaser and any interest accrued on that amount; and
B. The Purchaser shall be entitled to the Retention Amount and
any interest accrued on the Retention Amount; or
(c) Are within $100,000 of $3,697,368:
(i) The Composite Purchase Price shall not be adjusted and the
Interim Purchase Price shall not be increased or reduced; and
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(ii) The Purchaser shall procure that the Purchaser's Stakeholder pay
the Retention Amount to the Vendors' Stakeholder.
3.6 For the purpose of clarity, the parties agree that the amount paid by the
Purchaser to the Vendors under paragraph (i) of clause 3.2 shall be
increased by the amount of that excess, or decreased by the amount of that
amount, and the increase or decrease shall be wholly applied to Industrial
and Intellectual Property.
3.7 The Purchaser and Kaynar shall pay the Vendors the Purchase Price, and any
other amount due under this clause 3, by cheques drawn on a bank (as
defined by the Banking Act (C'th)).
3.8 All amounts to be calculated and paid in accordance with this clause 3
shall be rounded down to the nearest whole dollar.
3.9 All adjustments under clause 3.5 shall be certified in accordance with
clause 7.
3.10 Each of the Vendors appoints the Vendors' Stakeholder their agent for the
receipt of all payments made by the Purchaser and Kaynar under this
Agreement.
3.11 All payments to be paid by the Purchaser and Kaynar under this Agreement
shall be made to the Vendors' Stakeholder on behalf of the Vendors and the
receipt of the payments by the Vendors' Stakeholder shall discharge the
obligations of the Purchaser and Kaynar with respect to those payments, and
neither the Purchaser nor Kaynar shall be obliged to see the application of
any payments made to the Vendors' Stakeholder.
4. CONDITIONS PRECEDENT
4.1 This Agreement is conditional upon the satisfaction on or prior to the
Completion Date of the conditions precedent that on or prior to the
Completion Date:
(a) Pursuant to the Foreign Acquisitions and Takeovers Act (1975), the
Treasurer of the Commonwealth of Australia consents to the proposed
acquisition of the Business Assets, and the Treasurer shall be deemed
to have so consented:
(i) If a notice is issued pursuant to Section 26(1)(b)(ii) of the
Foreign Takeovers Act, stating that the Commonwealth Government
does not object to the proposed acquisition; or
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(ii) If notice of the proposed acquisition, having been given to the
Treasurer pursuant to Section 25 or Section 26 of the Foreign
Takeovers Act, the Treasurer is, by reason of lapse of time, not
empowered to make any order under Part II of the Foreign
Takeovers Act in relation to the proposed transfer or the
proposed issue;
(b) The Industry Research and Development Board approves the sale and
purchase under this Agreement of the Industrial and Intellectual
Property the subject of the R & D Grant;
(c) The Australian Trade Commission and the Company execute the deed of
novation set out in Schedule 9;
(d) General Electric Capital Corporation consents unconditionally in
writing to the purchase of the Business Assets by the Purchaser
hereunder;
(e) The Advent Group becomes related to the Company (within the meaning of
Section 160G of the Income Tax Assessment Act 1936) on or prior to the
Effective Date;
(f) Kaynar and the US Subsidiary:
(i) Execute the US Asset Sale Agreement; and
(ii) Complete the sale and purchase under the US Asset Sale Agreement
in accordance with its terms;
(g) The Purchaser obtains the consent of the lessor under the lease of the
real property described in Part A of Schedule 7 to the assignment of
that lease to the Purchaser and of any mortgagee of that real
property;
(h) There has not been any material adverse change to the financial
condition of the Australian Business since the date of execution of
this Agreement; and
(i) The Purchaser and Kaynar have completed to their satisfaction a due
diligence investigation of the Business Assets and the Business
Liabilities.
4.2 The parties shall take such practical steps and use best endeavours as may
be within their respective powers to enable the conditions precedent set
out in clause 4.1 to be fulfilled on or prior to the Completion Date.
4.3 Subject to clause 4.4, if the conditions precedent set out in clause 4.1
are not fulfilled as at 15 August 1996, or such other date as the parties
may agree, then any party may, at any time after that date by written
notice to the others, give two (2) Business Days notice of intention to
<PAGE>
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terminate this Agreement, and if the conditions precedent are not fulfilled
as at the expiration of that notice, or, if no notice is given within that
two (2) Business Day period, no party shall be under any obligation to any
other party under this Agreement other than in respect of any antecedent
breach.
4.4 A party may not terminate this Agreement if it relies on the non-fulfilment
of any condition in respect of which it is in breach of its obligation
under clause 4.2.
4.5 The conditions precedent set out in clause 4.1 have been included for the
benefit of each party to this Agreement, and the conditions precedent may
only be waived in whole or in part with the consent of each of the parties.
5. STOCKTAKE
5.1 For the purposes of determining the amount of the Purchase Price to be
applied to Stock, under clause 3.2, the Company shall determine the value
of Stock not more than seven (7) days after the Completion Date in
accordance with this clause 5.
5.2 All Stock shall be valued at the lower of cost and net realisable value,
and costs are to be assigned on a first in first out basis and include
direct materials, direct labour and an appropriate portion of variable and
fixed overhead expenses.
5.3 Any dispute as to the quantity or value of Stock shall be determined at the
request of either the Company or the Purchaser in accordance with clause 7.
6. COMPLETION
6.1 Completion of the sale and purchase of the Business Assets shall take place
on the Completion Date at the office of the Vendors' solicitors, Norton
Smith Gledhill, Level 23, 459 Collins Street, Melbourne, Victoria, or at
such other place as the parties may agree, at which time all the Vendors'
right, title and interest in and to the Business Assets shall pass to the
Purchaser. The Vendors, until completion of the sale and purchase of the
Business Assets, remain the owners of and bear all risks in connection with
the Business Assets. On the Completion Date the risk in the Business
Assets passes to the Purchaser.
6.2 Any party may give to the other parties written notice specifying the
Effective Date which shall be a date not less than two (2) Business Days
after the date that the written notice is given.
<PAGE>
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6.3 The Vendors shall, at completion, and subject to clause 6.5, deliver to the
Purchaser and Kaynar or its nominee (as the case may be), and they shall
accept delivery of:
(a) The Business Assets and title to them;
(b) All deeds, instruments of transfer and other documents, notices,
certificates and consents (in a form satisfactory to the Purchaser)
reasonably necessary to effect the transfer of the legal and
beneficial ownership of the Business Assets free of all Encumbrances
to the Purchaser and Kaynar or its nominee (as the case may be),
including:
(i) Assignments or novations of the Transferred Leases, together with
all appropriate consents;
(ii) A deed of assignment in the form set out in Schedule 8 of all
Industrial and Intellectual Property;
(iii) A deed of novation of the ITES Loan in the form set out in
Schedule 9;
(iv) A release of the Bank Charge;
(v) If necessary, to enable transfer of registration of any motor
vehicle to the Purchaser, duly executed notices of disposition of
all motor vehicles and certificates of roadworthiness for those
motor vehicles;
(vi) Written consent by the Company to the registration by the
Purchaser of the company name "Recoil Pty Ltd" together with a
Companies Form 410 effecting the reservation of that company name
in the name of the Purchaser; and
(vii) A deed of assignment of the Book Debts and notice of intention to
register the assignment in the form set out in Schedule 14;
(c) All share certificates issued by the Subsidiaries, excluding the US
Subsidiary, for the Subsidiary Shares together with duly executed
instruments of transfer in registrable form in accordance with the
laws applicable to the relevant Subsidiary (save for the payment of
any applicable stamp duty) in favour of Kaynar or any nominee of it
(as transferee) from the Company (as transferors);
(d) All consents in a form reasonably acceptable to the Purchaser to the
assumption of the Business Liabilities by the Purchaser under this
Agreement;
<PAGE>
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(e) The written resignation of such of the existing directors, secretary
and public officer of the Company and the Subsidiaries as the
Purchaser shall, by written notice given to the Vendors seven (7) days
prior to the Completion Date, require to resign, and an acknowledgment
in such form as the Purchaser may reasonably require from each such
director, secretary and public officer that he has no claim of any
nature against those Subsidiaries, whether in respect of salary, fees,
compensation for loss of office, loans or otherwise, which has not
been disclosed to the Purchaser;
(f) Evidence of the repayment by Rudbar Pty Ltd ACN 006 126 110 of the
loan of $71,328 made to Rudbar Pty Ltd by the Company;
(g) The certificate of incorporation, common seal (and any duplicate or
official seal), memorandum and articles of association, register of
members, register of directors and secretaries, register of charges,
minute books of the directors' and shareholders' meetings and all
other statutory registers and records of the Subsidiaries, other than
the US Subsidiary, all in proper order and condition and fully entered
up and otherwise complying with all legal requirements;
(h) All other books, documents and records of the Subsidiaries, other than
the US Subsidiary, including any documents of title, all in proper
order;
(i) A power of attorney executed by the Company and Mr Price appointing
Kaynar or its nominee (as the case may be) their attorney for the
purpose of receiving notices and attending general meetings of the
Subsidiaries (other than the US Subsidiary) until such time as Kaynar
or its nominee is registered as a shareholder of the relevant
subsidiary;
(j) Written opinions in a form approved by General Electric Capital
Corporation from the legal advisers to the Vendors, the Purchaser and
Kaynar, and
the Vendors shall sign such transfers and other forms as are produced to
them by the Purchaser as are required to transfer the existing services of
the Australian Business, including telephone, facsimile, electricity and
gas to the Purchaser.
6.4 The Vendors shall, at completion, deliver to the Purchaser written notice
of any:
(a) Items of Plant and Equipment listed in Schedule 4 which have then been
disposed of;
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(b) Items of Plant and Equipment which are then additional to the Plant
and Equipment listed in Schedule 4;
(c) Business Contracts listed in Schedule 1 which have then been
terminated;
(d) Business Contracts which are additional to the Business Contracts
listed in Schedule 1;
(e) Transferred Leases listed in Schedule 7 which have then been
terminated;
(f) Transferred Leases which are additional to the Transferred Leases
listed in Schedule 7;
(g) Transferring Employees who are then no longer employees of the
Company; and
(h) Any additional persons not listed as Transferring Employees who have
become employees of the Company,
and any such item of Plant and Equipment, Business Contract and Transferred
Lease shall be taken to be excluded or included (as the case may be) in
Schedules 4, 1 and 7 (as the case may be), and any such person shall be
taken to not be or to be (as the case may be) a Transferring Employee.
6.5A For the purpose of clarity the parties acknowledge and agree that if the
Vendors give notice under clause 6.4 the giving of that notice shall be
taken for the purposes of clause 16.4 to make the Purchaser aware of a
matter which arises after the date of this Agreement and is inconsistent
with a warranty or representation made elsewhere in this Agreement by the
Vendors, and the Purchaser shall be entitled to the rights given by that
clause 16.4.
6.5 The Purchaser shall, at completion:
(a) Pay out, and otherwise satisfy the requirements for the release of,
the Bank Charge; and
(b) Deliver to the Vendors copies of the consents and approvals referred
to in paragraphs (a), (b), (d) and (g) of clause 4.1.
6.6 A member of the Advent Group shall at completion deliver to the Purchaser a
letter stating that the condition precedent set out in paragraph (e) of
clause 4.1 is satisfied as at the Effective Date.
6.7 The Vendors shall, at or prior to completion, cause the following meetings
to be held:
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(a) A meeting of the shareholders of the Company at which the shareholders
will approve and consent to the transactions contemplated by this
Agreement and the US Asset Sale Agreement;
(b) A meeting of the directors of Recoil (Europe) Ltd at which the
directors will approve and consent to the transfer of shares from the
Company to Kaynar or its nominee and, subject to payment of any stamp
duty, approve the registration of that transfer in the register of
members of Recoil (Europe) Ltd;
(c) A meeting of the directors of the Company at which the directors will
authorise Kenneth David Jones to act for and on behalf of that company
to execute a Belgian share sale agreement;
(d) A meeting of the shareholders of Recoil Marketing BVBA at which the
shareholders will unanimously decide to transfer their shares in
Recoil Marketing BVBA.
6.8 The obligations of the parties in relation to completion are interdependent
so that the Purchaser is not obliged to complete the purchase of the
Australian Business unless the purchase of all of the Business Assets and
US Assets are completed simultaneously, and all actions at completion take
place simultaneously and no delivery or payment is to be taken to have been
made until all deliveries and payment have been made.
7. ACCOUNTS, NET TANGIBLE ASSETS AND OTHER MATTERS
7.1 The Company shall, within thirty (30) days of the Completion Date:
(a) Prepare and provide to the Purchaser the Accounts, which shall be:
(i) Prepared in accordance with Australian Accounting Principles
consistently with past practices of the Company; and
(ii) Audited by the Company's Auditor at the cost of the Company,
and the Purchaser's Auditor shall be entitled at the cost of the
Purchaser to audit the Accounts;
(b) Determine the Net Assets of the Company in accordance with clause 7.3,
and provide a copy of that
<PAGE>
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determination to the Purchaser, certified by the Company's Auditor;
and
(c) Prepare and provide to the Purchaser the Completion Statement,
certified by the Company's Auditor, which shall show the:
(i) Amount and method of calculating the Purchase Price; and
(ii) Amount of any adjustment to the Composite Purchase Price and the
increase or decrease of the Interim Purchase Price due to the
Vendors, or the Purchaser, under clause 3.5;
(iii) Allocation of the Purchase Price to the Business Assets; and
(iv) Any interest due to the Vendors, and the Purchaser, under clause
3.5.
7.2 The Purchaser shall, within seven (7) days of receiving the last of the
matters under clause 7.1, notify the Vendors whether or not they accept, or
do not accept, any of them, and if:
(a) The Purchaser accepts all of them, they shall be conclusive of all
relevant matters to be determined under this Agreement; and
(b) The Purchaser does not accept any of them, those that are not accepted
shall, subject to clause 7.4, be agreed to by the Company's Auditor
and the Purchaser's Auditor within seven (7) days of the expiration of
the first mentioned seven (7) day period.
7.3 In determining the Net Assets of the Company, the Company's Auditor shall
make the following adjustments to the Accounts:
(a) Any Excluded Assets in existence as of, or after, the Effective Date,
other than the Excluded Assets referred to in paragraphs (i) and (iv)
of the definition of Excluded Assets in clause 1.1 and one half of the
value of the Excluded Asset referred to in paragraph (ii) of the
definition of Excluded Assets inc clause 1.1 disclosed in the
Accounts, shall be excluded; and
(b) The only liabilities that shall be taken into account will be those
disclosed in the Accounts in existence as of, or after the Effective
Date, but the Excluded Liabilities referred to in paragraph (ii) of
the
<PAGE>
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definition of Excluded Liabilities in clause 1.1, shall be excluded.
7.4 The determination of any matter in respect of which the Vendors and the
Purchaser, or the Company's Auditor and the Purchaser's Auditor, are unable
to agree under all or any of clauses 3, 5 and this clause 7, shall be
referred at the request of the Vendors or the Purchaser to an independent
chartered accountant agreed to by them, and failing agreement within two
(2) Business Days of a request being made therefor, by an independent
chartered accountant nominated by the President for the time being of the
Victorian Chapter of the Institute of Chartered Accountants in Australia or
the successor of that body who shall in any case be appointed on terms that
he shall make his determination within fourteen (14) days of his
appointment.
7.5 The independent chartered accountant shall act as an expert and not as an
arbitrator, the costs of making any determination shall be borne by the
Vendors, on the one hand, and the Purchaser, on the other hand, equally.
7.6 Any determination made by the independent chartered accountant shall be
binding on the parties.
7.7 The parties shall use their best endeavours to procure the independent
chartered accountant to make his determination within fourteen (14) days of
his appointment.
8. TRANSFERRING EMPLOYEES
8.1 The Purchaser shall, on or before the Completion Date, offer to each of the
Transferring Employees employment with the Purchaser on terms as to salary
and financial benefits no less favourable than the terms under which each
is employed by the Company in conducting the Australian Business on the
Effective Date being the terms disclosed to the Purchaser prior to the date
of this Agreement.
8.2 The Purchaser covenants with the Company that in respect of all
Transferring Employees the Purchaser shall:
(a) Abide by the terms and conditions of the offer of employment made
under clause 8.1; and
(b) Indemnify the Company for any Loss suffered or incurred by it and any
Claim made against it in respect of all Transferring Employees:
(i) Occasioned by the Purchaser's failure to observe those terms and
conditions of employment; and
(ii) Subject to clause 8.4, who do not accept those terms and
conditions.
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8.3 Each of the Vendors and the Purchaser shall use its best endeavours to
encourage all Transferring Employees to accept the offers made by the
Purchaser under clause 8.1.
8.4 The Company shall pay on the Completion Date all Transferring Employees who
do not accept the offer of employment made under clause 8.1, all amounts
due and owing to them in respect of accrued salary or wages, holiday pay
and long service leave pay, but not any Claim for or in respect of
severance or termination of employment.
8.5 The Vendors shall pay, and indemnify the Purchaser in respect of, any Claim
for workers' compensation not covered by indemnity compensation insurance,
any violation of any relevant employment laws and any common law Claim
arising from any injury with respect to any employees of the Company but
not any Claim for or in respect of severance or termination of employment
of a Transferring Employee.
8.6 The Company shall, on the Completion Date release all Transferring
Employees employed by it from employment by it.
8.7 On and from the Effective Date the Purchaser shall, subject to clause 8.4:
(a) Pay all Transferring Employees all amounts due to them on and from the
Effective Date as and when they fall due; and
(b) Indemnify the Company against any liability for any Claim for any
amount due to or accrued by all employees who accept the offer in
clause 8.1 on or after the Effective Date,
and whether the amount or liability accrued prior to the Effective Date, it
being the intention of the parties that the Purchaser shall be responsible
for and pay all amounts disclosed in the Accounts as accrued but not then
due to employees on the Effective Date for salary or wages, holiday pay and
long service leave pay and other severance or termination pay (whether or
not disclosed in the Accounts) other than that to be paid by the Company
under clause 8.4.
9. BUSINESS CONTRACTS AND TRANSFERRED LEASES
9.1 With effect on and from the Effective Date, the Purchaser assumes
responsibility for the performance of:
(a) The Business Contracts; and
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(b) The Transferred Leases,
("all agreements") and agrees to indemnify and save harmless the Vendors on
and from the Effective Date from all Claims and Losses relating to all
agreements arising from matters or things done or omitted to be done on or
from the Effective Date.
9.2 The Purchaser shall be entitled, on and from the Effective Date, to the
rights and benefits arising under or in relation to all agreements.
9.3 The Vendors agree to indemnify and hold harmless the Purchaser on and from
the Effective Date, from all Claims and Loss relating to all agreements
entered into by them arising from matters or things done, or omitted to be
done, at any time up to and including the day before the Effective Date and
not included in the definition of Business Liabilities.
9A. BUSINESS CONTRACTS
9A.1 The Vendors shall novate or assign to the Purchaser each and every Business
Contract,with effect from the Effective Date. If any other party to any
Business Contract objects to such assignment or novation the Purchaser may
elect for the provisions of clause 9A.2 to apply.
9A.2 The Vendors undertake to the Purchaser, in the situation where any third
party to a Business Contract objects to or refuses to consent to an
assignment or novation of a Business Contract to:
(a) Duly perform the contract with the assistance of such employees and
materials of the Purchaser which the Purchaser shall make available as
and when necessary at no expense to the Vendors;
(b) Delegate management to the Purchaser if it is reasonably possible to
do so;
(c) Enforce the contract against the other party or parties to the
relevant Business Contract in such a manner as the Purchaser may
direct from time to time, at no expense to the Vendors;
(d) Not agree to any amendment to the Business Contract or waiver of the
Vendors' rights under the relevant Business Contracts without the
prior written consent of the Purchaser; and
(e) Pay to the Purchaser forthwith all moneys received by the Vendors for
goods and services supplied by the
<PAGE>
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Vendors in respect of the performance by them of the relevant Business
Contracts.
9B. TRANSFERRED LEASES
9B.1 The Company shall novate or assign (with the written consent of each of the
lessors) the Transferred Leases to the Purchaser with effect from the
Effective Date.
9B.2 If any of the Transferred Leases have not been effectively assigned or
novated to the Purchaser at completion the Purchaser may require that the
Vendors at their own cost (save in respect of stamp duty, registration fees
and the Purchaser's legal costs) take such action as may be reasonably
necessary to procure the assignment or novation of such Transferred Leases
to the Purchaser on terms which are not materially adversely different from
those in force at the date of execution of this Agreement.
9B.3 The Vendors indemnify the Purchaser on demand in respect of any stamp duty
including, without limitation, fines and penalties due but unpaid in
respect of any of the Transferred Leases as at the Completion Date.
10. BUSINESS LIABILITIES AND INDEMNITIES BY THE PURCHASER AND THE VENDORS
10.1 Subject to clause 10.2 the Purchaser covenants to indemnify and keep
indemnified the Vendors:
(a) From all Claims and Losses brought or made against the Vendors in
connection with the use of the Business Assets on and from the
Effective Date that arise on or after the Effective Date; and
(b) In respect of the Business Liabilities, and the Purchaser covenants to
pay all of the Business Liabilities as and when they fall due.
10.2 Subject to clauses 8.7, 10.2A and 10.2B, the Vendors indemnify the
Purchaser and Kaynar in respect of all Losses and Claims which either or
both:
(a) Are incurred in connection with the use of the Business Assets prior
to the Effective Date; or
(b) Relate to the Excluded Liabilities,
and are not Business Liabilities PROVIDED HOWEVER THAT in the case of an
Excluded Liability of the kind referred to in paragraph (xiii) of the
definition of Excluded
<PAGE>
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Liabilities in clause 1.1, the Vendors shall not be required to
indemnify the Purchaser and Kaynar under this clause 10.2 if the
Purchaser and Kaynar:
(c) During the two year period referred to in paragraph (xiii) of
the definition of Excluded Liabilities in clause 1.1, have
failed to take reasonable steps as a result of which the
Trademarks described in schedule 3 may be declared void,
voidable, invalid or subject to removal or expungement; and
(d) Have not taken all reasonable steps to mitigate all Loss
arising as a result of any Claim of the kind referred to in
paragraph (xiii) of the definition of Excluded Liabilities
in clause 1.1.
10.2A The Vendors shall not be required to indemnify the Purchaser or Kaynar
under clause 10.2 for any Claim or Loss where the amount of the
liability for all Vendors in aggregate in respect of all Claims and
Losses is more than the difference between $13,700,000 and the US
Purchase Price.
10.2B Neither the Purchaser nor Kaynar shall bring any action under clause
10.2 in respect of any Claim or Loss unless the aggregate amount of
all Claims and Losses incurred by them exceeds $100,000 and the
Vendors shall only be liable to the Purchaser or Kaynar in respect
of the Claim or Loss to the extent that the aggregate amount of all
Claims and Losses exceeds $100,000.
10.3 The Vendors hereby indemnify and hold harmless the Purchaser and
Kaynar in respect of any Claim or Loss made against the Purchaser
or Kaynar in respect of the sale or provision of Stock by the
Purchaser and Kaynar or the Subsidiaries on or after the Effective
Date.
10.4 If the Purchaser or the Vendors are seeking indemnification
(the party seeking indemnification to be referred to as the
"Indemnified Party") and desires to make a Claim against the other
party or parties for indemnification (the "Indemnifying Party")
under this clause 10, the Indemnified Party shall, within thirty
(30) days after the Indemnified Party becomes aware of a Claim by
notice or knowledge, notify the Indemnifying Party in writing of
any Claim or demand as to which the Indemnified Party is entitled
to claim indemnification, the clause under this Agreement with
respect to which such Claim is being made and, to the extent known,
the amount and circumstances surrounding such Claim. In the
event that Claim is a third party Claim against an Indemnified
Party or involves a Claim by or liability involving a governmental
authority, the Indemnifying Party shall have the right to employ
counsel of its choice to defend any such Claim or demand PROVIDED
HOWEVER THAT:
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(a) The Indemnified Party is kept fully informed of all developments
and is furnished copies of all relevant papers;
(b) The Indemnifying Party diligently prosecutes the defence; and
(c) The Indemnified Party shall have the right to participate, at its
own undertaking and through counsel selected by it, in the defence
of any such Claim. If the conditions of the foregoing proviso are
not met, or the Indemnifying Party chooses not to control the
defence, the Indemnified Party shall assume and control the
defence of such third party Claim or suit at the expense of the
Indemnifying Party. The Indemnifying Party, or, if the conditions
to the foregoing proviso are not met, the Indemnified Party, shall
have the right to pay, compromise or settle any such third party
Claim with the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld.
10.5 Unless otherwise provided in this Agreement, each indemnity under this
Agreement continues indefinitely and the party to whom the benefit of an
indemnity is given shall be kept indemnified.
11. CHANGE OF NAME
11.1 The Company shall, on or before the Completion Date, pass a special
resolution to change its name from Recoil Pty Ltd to some other
dissimilar name, not incorporating the word "Recoil".
11.2 Each of the Vendors, Mr Price and the U.S. Subsidiary covenants with the
Purchaser and Kaynar that they shall not, after the Completion Date, use
the name Recoil or any similar name in the conduct of any business of any
of them or otherwise PROVIDED HOWEVER that the Company shall be entitled
to use the name Recoil to designate its name until such time as the
Australian Securities Commission has issued a certificate of change of
name.
11.3 The Company covenants with the Purchaser that:
(a) The Company shall change its name in accordance with clause 11.1;
(b) The Purchaser shall be entitled to use the name Recoil or any
similar name as the name of the Purchaser; and
(c) The Company shall, at its own expense, do all acts, matters and
things required to be done by the Company
<PAGE>
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to permit the Purchaser to change its name to Recoil or any similar
name.
12. RESTRAINT
12.1 For the purpose of protecting the Purchaser and Kaynar in respect of the
goodwill associated with the Australian Business and the businesses of
the Subsidiaries other than the U.S. Subsidiary and in consideration of
the benefits to be derived from the sale by the Vendors of the Business
Assets and of the agreement evidenced by this Agreement, each of the
Vendors, Mr Price and the US Subsidiary ("the restricted party")
covenants severally with the Purchaser and Kaynar for itself and as
trustee and agent for the Subsidiaries other than the US Subsidiary that
it shall not:
(a) For the period from the date of this Agreement specified below:
(i) In the case of the Price Interests, the US Subsidiary and the
Company, three (3) years; and
(ii) In the case of the Advent Group, one (1) year; and
(b) In the area specified below:
(i) Australia;
(ii) The European Union; and
(iii) The United States of America,
(either directly or indirectly) be concerned with or interested in any
undertaking or business in competition with the Australian Business or in
competition with the business of the Subsidiaries (other than the US
Subsidiary) as at the Effective Date PROVIDED HOWEVER that this clause
shall not prevent any restricted party from holding or being otherwise
interested as principal in stocks, shares, units or securities of any
company or trust ("securities"), which securities represent less than 10%
in number of the securities on issue in any such company or trust and
which securities are listed for quotation on any stock exchange.
12.2 During the period referred to in clause 12.1(a), the restricted parties
shall not on their own account or for any other person:
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(a) Induce or attempt to induce any employee to leave the employment of
the Purchaser, Kaynar or the Subsidiaries other than the US
Subsidiary
(b) Induce or attempt to induce any customer away from the Purchaser,
Kaynar or the Subsidiaries other than the US Subsidiary; or
(c) Induce or attempt to induce any supplier or financier away from the
Purchaser, Kaynar or the Subsidiaries other than the US Subsidiary.
12.3 (a) Each of the covenants contained in clause 12.1 is to be construed
as a separate independent covenant severable from all other
covenants contained in clause 12.1. If any of the covenants is
found to be void, invalid or otherwise unenforceable, such
unenforceability does not affect the validity or enforceability of
any of the separate covenants.
(b) It is intended by the parties that restraints contained in this
clause operate to the maximum extent except that, if any of the
prohibitions or restrictions is judged to go beyond what is
reasonable in the circumstances, but would be judged reasonable if
the period or area were reduced, then the prohibitions or
restrictions apply with that period or area reduced by the minimum
amount necessary.
(c) The restricted party acknowledges that the duration, extent and
application of the respective restrictions contained in this clause
are not greater than is reasonably necessary for the protection of
the interests of the Purchaser and the preservation of the goodwill
acquired under this Agreement, but that, if such restriction is
adduced by any court of competent jurisdiction to be void or
unenforceable but would be valid if part of the wording of this
clause was either or both deleted or the period was reduced, those
restrictions apply with such modification as may be necessary to
make this clause valid and effective.
(d) In the event of any breach by the restricted party of its
obligations under this clause then, in addition and without
prejudice to any other remedy which the Purchaser may have, the
Purchaser is entitled to seek and obtain injunctive relief in
any court of competent jurisdiction.
13. BOOK DEBTS
13.1 The Company and the Purchaser agree and acknowledge that from the
Effective Date the Book Debts are the property of the Purchaser.
<PAGE>
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13.2 On or before the Effective Date, the Company shall compile a list of
Book Debts as at the Effective Date detailing the name, address and
amount owing in relation to each Book Debt and deliver to the
Purchaser a copy of such list.
13.3 Any payment (including any part payment) with respect to any Book Debt
received by the Company on or after the Effective Date shall be remitted,
as soon as practicable, to the Purchaser.
13.4 Any monies collected by the Company or the Purchaser in respect of
trading indebtedness from or on behalf of any debtor are to be first
applied in satisfying the invoice against which the particular debtor
makes payment or if no such invoice is nominated the collections are
to be applied first in satisfying the debtor's account from whom such
collection was received on a first-in first-out basis, save where a
debt is in dispute.
13.5 The Vendors warrant to the Purchaser that the Purchaser will, within 180
days after the Completion Date, recover an amount equal to the total
value of the Book Debts shown in the Accounts, less any provisions in the
Accounts for bad and doubtful debts ("the warranted amount").
13.6 The Vendors indemnify the Purchaser in respect of any Loss by the
Purchaser resulting from the failure by the Purchaser to recover the
warranted amount within that 180 day period, and shall pay to the
Purchaser within seven (7) days of receiving a written request
therefor the amount of any such Loss.
13.7 Where the Vendors pay any amount in respect of any Book Debt under clause
13.6, the Purchaser shall assign the corresponding portion of that Book
Debt to the Company within seven (7) days of receipt of that amount and
it shall be the property of the Company.
13.8 The Purchaser covenants with the Vendors that the Purchaser shall:
(a) Use its reasonable endeavours to collect all Book Debts within 180
days after the Completion Date; and
(b) Comply with all reasonable requests of the Vendors to provide the
Vendors with information relating to the collection of the Book
Debts.
14. RIGHTS AND OBLIGATIONS PENDING COMPLETION
14.1 From the date of this Agreement to the Completion Date the Vendors shall:
<PAGE>
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(a) Ensure that the Australian Business and the businesses of the
Subsidiaries other than the US Subsidiary is conducted in accordance
with normal and prudent practice (having regard to the nature of the
Australian Business and the businesses of the Subsidiaries other
than the US Subsidiary);
(b) Use their reasonable commercial endeavours to maintain the
profitability and value of the Australian Business and the
businesses of the Subsidiaries other than the US Subsidiary;
(c) Use the Business Assets and the assets of the Subsidiaries other
than the US Subsidiary with reasonable care;
(d) Not without the prior consent of the Purchaser:
(i) Enter into any material contract or commitment or, other than
in the ordinary course of operating the Australian Business
and the businesses of the Subsidiaries other than the US
Subsidiary, incur any material liabilities; or
(ii) Hire or terminate the employment of any employee or alter the
terms or conditions of employment of the Transferring Employees
or any employees of the Subsidiaries other than the US
Subsidiary;
(e) Keep the Business Assets and the assets of the businesses of the
Subsidiaries other than the US Subsidiary insured on a replacement
basis and comply in all respects with the requirements of all
insurance policies maintained in respect of the Business Assets and
the assets of the businesses of the Subsidiaries other than the US
Subsidiary; and
(f) Consult with Kaynar on any matters which may have a material impact
on the value or performance of the Australian Business and the
businesses of the Subsidiaries other than the US Subsidiary.
14.2 The Vendors warrant to the Purchaser that the Australian Business and the
businesses of the Subsidiaries other than the US Subsidiary have been
conducted in accordance with paragraph (a), (b), (c) and (e) of
clause 14.1 from 31 December 1995 to the Effective Date.
15. KAYNAR GUARANTEE AND INDEMNITY
15.1 Kaynar, unconditionally and irrevocably, guarantees to the Vendors the
due and punctual performance of the Purchaser's
<PAGE>
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obligations under this Agreement (including any indemnities given in
favour of the Vendors).
15.2 As a separate and independent principal obligation, Kaynar indemnifies
and holds the Vendors harmless from and against all Loss incurred or
suffered by the Vendors, and all Claims made against the Vendors as a
result of default by the Purchaser in the performance of any such
obligation.
15.3 This guarantee and indemnity:
(a) Applies:
(i) To the present and future obligations of the Purchaser
under this Agreement;
(ii) To this Agreement as amended, supplemented, renewed or
replaced; and
(iii) Regardless of whether Kaynar is aware of, or has
consented to, or is given notice of, any amendment, supplement,
renewal or replacement of any agreement to which the Vendors
and the Purchaser are a party or the occurrence of any other
thing; and
(b) Is not affected, nor are the obligations of Kaynar under this
Agreement released or discharged or otherwise affected, by anything
which, but for this provision, must have that effect,
and the obligations of the Purchaser hereunder extend to any change in
the obligations of the Purchaser as a result of any amendment,
supplement, renewal or replacement of this Agreement or the occurrence
of any other thing.
15.4 If any payment, conveyance, transfer or other transaction relating to, or
affecting, any obligation of the Purchaser under this Agreement is:
(a) Void, voidable or unenforceable under any law relating to
bankruptcy, liquidation or protection of creditors in whole or in
part; or
(b) Is claimed to be void, voidable or unenforceable under any law
relating to bankruptcy, liquidation or protection of creditors, and
that claim is upheld, conceded or compromised in whole or in part,
the liability of Kaynar under this guarantee and indemnity is the same as
if:
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(c) The payment, transaction, conveyance or transfer or the void, voidable
or unenforceable part of it; and
(d) Any release, settlement or discharge made in reliance on anything
referred to in paragraph (c),
had not been made, and Kaynar must immediately take all action and sign all
documents reasonably necessary or reasonably required by the Vendors to
restore to them the benefit of this guarantee and indemnity.
15.5 This guarantee and indemnity is:
(a) A principal obligation and is not to be treated as ancillary or
collateral to any other right or obligation; and
(b) Independent of, and not in substitution for or affected by, any other
collateral security which the Vendors may hold in respect of the
obligations of the Purchaser under this Agreement or any other person,
except that no Claim may be brought under this guarantee and indemnity
unless a written notice of claim in respect of the matter concerned has
been given to the Purchaser and the Claim remains unsatisfied seven (7)
Business Days after the giving of that notice.
15.6 This guarantee and indemnity is a continuing obligation of Kaynar despite
any settlement of account among the Vendors and any account debtor, and
remains in full force and effect until:
(a) The obligations of the Purchaser under this Agreement have been
performed; or
(b) This guarantee and indemnity has been fully discharged by the
Purchaser.
15.7 The parties acknowledge and agree that all amounts paid, whether under this
clause 15 or as provided elsewhere in this Agreement (other than clause
3.5), shall not exceed the difference between $13,700,000 and the US
Purchase Price.
16. WARRANTIES
16.1 Subject to this Agreement, the Vendors warrant and represent to the
Purchaser and Kaynar the matters set out in the Schedule 11 ("the
warranties"). The Vendors acknowledge that Kaynar and the Purchaser enter
into this Agreement in full reliance on the warranties and that the
warranties have been made with the intention of inducing Kaynar and the
Purchaser to enter into this Agreement.
<PAGE>
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16.2 The Vendors warrant and represent to the Purchaser and Kaynar that the
warranties are true, complete and accurate and not misleading in any way.
16.3 The Vendors shall not be liable for any inaccuracy or breach of any of the
warranties, or any representation made elsewhere in this Agreement, if the
inaccuracy or breach or the facts giving rise to the inaccuracy or breach
is or are actually known to the Purchaser or Kaynar as a result of any of
the:
(a) Due diligence investigation undertaken by the Purchaser or Kaynar
prior to the date of this Agreement; or
(b) Material:
(i) Made available to the Purchaser or Kaynar by the Vendors listed
in Schedule 12; or
(ii) Notified to the Purchaser or Kaynar in writing after the date of
this Agreement, PROVIDED HOWEVER THAT in the case of
sub-paragraph (ii) of paragraph (b), the Purchaser and Kaynar
shall be entitled to treat the notification as making it aware of
a matter which, for the purposes of clause 16.4, arises after the
date of this Agreement and is inconsistent with a warranty or
representation made elsewhere in this Agreement by the Vendors,
and the Purchaser and Kaynar shall be entitled to the rights
given by that clause 16.4.
16.4 If:
(a) The Vendors, the Purchaser or Kaynar become aware before the
Completion Date of a matter which arises after the date of this
Agreement and is inconsistent with any of the warranties or any
representation made elsewhere in this Agreement, it must immediately
notify the other of them in writing of the matter;
(b) The matter is such as to have a fundamental and adverse impact on the
Australian Business and prospects taken as a whole, then the Vendors,
Kaynar and the Purchaser must negotiate in good faith to resolve the
issue and, failing an outcome of the negotiations satisfactory to both
parties, any of them are entitled to rescind this Agreement by giving
written notice to the other of them within five (5) Business Days of
becoming aware of the matter, provided that completion has not already
occurred; and
<PAGE>
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(c) This Agreement is not rescinded pursuant to paragraph (b) of this
clause, then the parties must proceed to completion and the Purchaser
and Kaynar must not bring any Claim against the Vendors in respect of
any matter referred to in paragraph (a), provided that this exclusion
does not apply:
(i) If and to the extent that the matter giving rise to the Claim was
caused by the negligence or wilful default of the Vendors in
their management of the Australian Business after the date of
this Agreement; or
(ii) If the matter is such as to have a fundamental and adverse impact
upon the Australian Business and its prospects taken as a whole
and the Purchaser and Kaynar were not aware of such matter before
completion.
16.5 The Vendors shall not be liable to the Purchaser or Kaynar for any Claim in
respect of any breach of the warranties where either or both:
(a) The Claim is not agreed, compromised or settled, or the Purchaser or
Kaynar has not issued and served legal proceedings against the
relevant Vendors within one year of the Completion Date; or
(b) The amount of the liability for all Vendors in aggregate in respect of
all Claims is more than the difference between $13,700,000 and the US
Purchase Price.
16.6 Each of the warranties is given as of the date of this Agreement and the
Completion Date and subject to this Agreement.
16.7 The warranties are taken to be complete immediately before completion with
respect to the facts then existing.
16.8 Subject to clause 16.5, the Vendors covenant to indemnify and keep
indemnified the Purchaser and Kaynar against all liabilities which may be
incurred by the Purchaser as a result (directly or indirectly) of a breach
of any of the warranties.
16.9 Notwithstanding any other provision of this Agreement to the contrary,
neither the Purchaser nor Kaynar shall bring any action under this
Agreement, other than clauses 11.2, 12 and 20.5 in respect of any Claim or
Loss relating to any indemnity, warranty, representation or covenant made
or given to them by the other parties to this Agreement ("the warranty
claims") unless the aggregate amount of the warranty claims exceeds
$100,000, and the other parties
<PAGE>
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shall only be liable to the Purchaser or Kaynar in respect of the
warranty claims to the extent that the warranty claims exceed $100,000.
17. SUPERANNUATION
17.1 The Vendors covenant that the Transferring Employees are members of the
Superannuation Funds, and no other superannuation funds and that the
Purchaser shall become the nominated employer under the Superannuation
Funds for those Transferring Employees who accept employment with the
Purchaser in accordance with this Agreement.
17.2 The Vendors covenant with the Purchaser that the Company has complied with
its superannuation requirements under the Superannuation Industry
Supervision Act and indemnifies and holds harmless the Purchaser from all
Claims and Loss brought or made against the Purchaser in relation to such
matters arising prior to the Effective Date.
17.3 The Vendors shall use their reasonable endeavours to assist the Purchaser
in becoming a nominated employer under the Super Funds.
18. ACCESS TO BUSINESS RECORDS
18.1 On and from the Completion Date, the Purchaser shall provide the Company
with access to the Business Records, and to all other the documents and
records of the Australian Business, and permit them to take copies thereof
for the purposes of enabling them to complete any taxation or other
statutory return, and for all other reasonable commercial purposes.
19. JOINT AND SEVERAL LIABILITY
The obligations and liability of each of the Vendors and Mr Price under
this Agreement are joint and several except in the case of the
obligations and liability of each of the Vendors and Mr Price arising
under clauses 11, 12, and 20, which shall be several only.
20. CONFIDENTIALITY
20.1 No announcement or communication concerning these terms or conditions of
this Agreement shall be made or authorised by any of the parties to this
Agreement before the Completion Date without the prior written consent of
the other parties, except as permitted by this clause 20.
<PAGE>
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20.2 A party may disclose anything in respect of this Agreement as required:
(a) By applicable law; or
(b) By any recognised stock exchange on which its shares, or shares of
any related body corporate, are listed for quotation,
but to the extent possible, it shall consult with the other parties
before making the disclosure.
20.3 A party may disclose anything in respect of this Agreement to the
officers, employees and professional advisers of that party and of its
related bodies corporate, but it must use all reasonable endeavours to
ensure the matters disclosed are kept confidential.
20.4 If this Agreement is rescinded or terminated, the Purchaser and Kaynar
covenant with the Vendors to:
(a) Cease using all information and documents provided to it by the
Vendors in relation to this Agreement;
(b) Return that information and those documents and all copies to the
Vendors; and
(c) Keep that information and those documents confidential and not
disclose them to any person.
20.5 The Vendors and Mr Price covenant with the Purchaser not to use or
disclose any confidential information of the Company.
In this clause 20.5 "confidential information of the Company" means
information of every kind concerning or in any way relating to customers,
business transactions, records, financial affairs, trade secrets,
technical information, processes, all inventions and know-how used in
connection with the Australian Business other than information which is
in the public domain.
21. MOREN LITIGATION
21.1 Subject to clause 21.2 the Purchaser covenants to indemnify and hold
harmless the Company for and in respect of all Claims, Losses and costs
and expenses incurred by the Company in connection with complying with
clause 21.2.
21.2 The Company covenants with the Purchaser to:
(a) Continue to conduct the litigation commenced by the Company in the
Supreme Court proceeding no 7750 of
<PAGE>
- 41 -
1995 against Mr Christopher Moren ("the Moren Litigation") in
accordance with the instructions given to the Company by the
Purchaser from time to time;
(b) Not settle or compromise the Moren Litigation without the consent of
the Purchaser; and
(c) Not incur any expense in the conduct of the Moren Litigation without
the consent of the Purchaser unless it is incurred as a result of an
order of the Supreme Court.
21.3 The Company covenants that in respect of any monetary or other benefit
received by the Company in relation to the Moren Litigation, to account
to the Purchaser for that benefit after deducting any Loss, Claim, cost
or expense relating to the Moren Litigation incurred by the Company in
accordance with clause 21.2 or ordered by the Supreme Court.
22. GENERAL
22.1 This Agreement is governed by and shall be construed in accordance with
the laws in force in Victoria and the parties submit to the jurisdiction
of the courts of that state including all courts of appeal.
22.2 All representations, warranties, covenants and agreements made herein
shall survive any investigation made and shall survive completion.
22.3 Except as otherwise expressly provided, the provisions of this Agreement
shall enure to the benefit of and be binding upon the successors, heirs,
executors and administrators of the parties hereto.
22.4 Neither this Agreement nor any term thereof may be amended, waived,
discharged or terminated except by written instrument signed by each of
the parties hereto.
22.5 No party may assign its rights or obligations under this Agreement to any
person without the written consent of the other parties, which consent
shall not be unreasonably withheld PROVIDED HOWEVER that Kaynar and the
Purchaser may assign and transfer to General Electric Capital Corporation
or any other provider of financing to either of them (collectively, the
"Financier") all of such person's rights and remedies under and with
respect to this Agreement and any agreements, documents or instruments
executed in connection with this Agreement, including, without
limitation, its rights to any and all amounts payable to Kaynar and the
Purchaser under this Agreement, and each of the other parties to this
Agreement hereby consents to such
<PAGE>
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assignment and transfer and agrees to execute and deliver to any such
Financier confirmation thereof.
22.6 The parties shall each bear their own costs and expenses including legal
fees in connection with the negotiation and preparation of this
Agreement.
22.7 This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute
one instrument.
22.8 This Agreement shall be read and construed subject to all applicable laws
and shall have effect only to the extent permitted thereby. If, but for
this clause, any provision of this Agreement would be unenforceable,
voidable or void it shall be read and construed in such manner as will
preclude it from so being to the intent that such provision shall be read
and construed so as to be valid and enforceable to the greatest extent
possible. Each provision may be so read and construed (or deleted if
necessary) regardless of the effect which that may have on the provision
in question or any other provision or the Agreement as a whole.
22.9 Subject to clause 22.15, time shall be of the essence of this Agreement
in all respects and no extension or variation thereof shall operate as a
waiver of this provision.
22.10 Each party hereby covenants with the other to do all acts, matters and
things, including, without limitation, executing or signing agreements,
deeds or other matters which are required to be done in order to give
full effect to the provisions of this Agreement and the transactions
contemplated herein.
22.11 Without prejudice to any rights any party may have under this Agreement,
each party agrees to pay to the others on demand interest calculated at
the rate of two percent (2%) above the BBB Rate on any money which is
not paid by the party to any other party when payable, which interest
paid shall accrue daily from the date due for payment, until paid.
22.12 Any notice, demand or other communication required to be given or made
hereunder shall, unless otherwise expressly provided, be in writing and
be deemed duly given or made if delivered or sent by prepaid mail or by
facsimile communication as follows:
(a) To the Vendors, If delivered or sent by
Mr Price and the prepaid mail, the address
US Subsidiary at: set out at the beginning of
this Agreement;
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If by facsimile, to
61 3 9700561
(b) To the Purchaser at: If delivered or sent by prepaid mail, the
address set out the beginning of this
Agreement;
If by facsimile, to
0011 1 714 680 3153
(c) To Kaynar at: If delivered or sent by prepaid mail, the
address set out at the beginning of this
Agreement;
If by facsimile, to
0011 1 714 680 3153
or such other address as may be notified by any party to the other and
where served by post shall be deemed served on the tenth Business Day
following its posting.
22.13 Where, by virtue of the provisions of this Agreement, the day on which
any act, matter or thing is to be done is not a Business Day in the
place in which the act, matter or thing is to be done, such act, matter
or thing shall be done on the next succeeding Business Day.
22.14 The Purchaser shall pay all stamp duty and other similar charges
relating to the purchase by the Purchaser of the Business Assets under
this Agreement.
22.15 (a) If any party defaults under this Agreement, no party not in default
shall be entitled to exercise any of its rights arising out of the
default other than its right to sue for money then owing until it has
served the defaulting party with a written notice specifying the
default and its intention to exercise its rights unless the default
is remedied and the proper legal costs caused by the default and any
interest demanded are all paid within five (5) Business Days of
service of the notice or such longer period as may be specified, and
the defaulting party fails to comply with the notice.
(b) If the notice given pursuant to paragraph (a) also states that
unless the default is remedied within the period set out in the
notice, the Agreement will be rescinded pursuant to this clause
then, if the default is not so remedied the Agreement shall
thereupon be rescinded.
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(c) The provisions of this clauses 22.15 are subject to clause 16.3.
22.16 Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
and in combination with the US Asset Sale Agreement and the schedules
and exhibits thereto, a letter dated 19 July 1996 from Kaynar to
Mr Brian Ball regarding the payment of European lawyers' costs and a
letter dated 25 July 1996 from Arthur Andersen regarding the audit of
the Company constitutes the entire agreement among the parties
pertaining to the purchase and sale of the Business Assets and the
US Business Assets and supersedes all prior understandings, including,
but not limited to, the preliminary agreement dated 15 March 1996
between the Company, Kaynar, Mr Price, Lenarde and the Advent Group.
If there is any inconsistency between this Agreement and the
US Asset Sale Agreement with respect to the sale of the Business Assets
under this Agreement, then the provisions of this Agreement will prevail.
23. ENVIRONMENTAL REPORT
23.1 The Purchaser and Kaynar shall use their best endeavours to procure Rust
PPK Pty. Ltd. (ACN 058 381 507) to issue to the Vendors in their names a
limited phase two environmental site assessment by the Company's premises
at 20 Stamford Road, Oakleigh, Victoria, prepared by Rust PPK Pty. Ltd.
(in this clause 23, "the Environmental Report").
23.2 In the event that the Environmental Report is not issued to the Vendors
in accordance with clause 23.1, the Purchaser and Kaynar will render
every assistance to the Vendors should they wish to commission a report
similar to the Environmental Report, including giving the Vendors,
their agents or any person engaged by the Vendors to prepare the report
access to the premises at 20 Stamford Road, Oakleigh, Victoria.
IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and
year first hereinbefore written.
<PAGE>
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SIGNED for and on behalf of )
RECOIL PTY LTD ACN 006 664 731 ) /s/ Brian F. Ball
by BRIAN F. BALL in the ) . . . . . . . . . . . . . . . . . . .
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
RECOIL PTY LTD by BRIAN F. BALL ) /s/ Brian F. Ball
in the presence of: ) . . . . . . . . . . . . . . . . . . .
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
RECOIL PTY LTD ACN 006 509 708 ) /s/ Brian F. Ball
by BRIAN F. BALL in ) . . . . . . . . . . . . . . . . . . .
the presence of:
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
AUSTRALIAN PACIFIC TECHNOLOGY ) /s/ Brian F. Ball
LIMITED ACN 006 212 764 ) . . . . . . . . . . . . . . . . . . .
by BRIAN F. BALL )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
<PAGE>
- 46 -
SIGNED for and on behalf of )
WESTERN PACIFIC INVESTMENT ) /s/ Brian F. Ball
COMPANY LIMITED ) . . . . . . . . . . . . . . . . . . .
ACN 006 254 502 )
BY BRIAN F. BALL )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED by Mr. B. PRICE in the ) /s/ Bruce Price
presence of: ) . . . . . . . . . . . . . . . . . . .
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of B. )
PRICE HOLDINGS PTY LTD ACN 073 ) /s/ Bruce Price
779 352 by BRUCE PRICE )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
LEANARDE PTY LTD ACN 005 846 597 ) /s/ Bruce Price
By BRUCE PRICE )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
KAYNAR TECHNOLOGIES INC. by ) /s/ Tom Rowan
THOMAS JOSEPH ROWAN in the )
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . Witness
<PAGE>
- 47 -
SIGNED for and on behalf of RCL )
PTY ACN 073 750 428 by ) /s/ Tom Rowan
THOMAS JOSEPH ROWAN )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . Witness
<PAGE>
DATED 9 August 1996
- --------------------------------------------------------------------------------
RECOIL, INC.
- and -
KAYNAR TECHNOLOGIES INC.
- and -
RECOIL PTY LTD
- and -
ADVENT LIMITED
- and -
AUSTRALIAN PACIFIC TECHNOLOGY LIMITED
- and -
WESTERN PACIFIC INVESTMENT COMPANY LIMITED
- and -
MR. B. PRICE
- and -
B. PRICE HOLDINGS PTY LTD
- and -
LENARDE PTY LTD
-----------------------------------------------------
US ASSET SALE AGREEMENT
-----------------------------------------------------
I do hereby certify that this is a true and complete copy of the US Asset Sale
Agreement of 82 pages.
/s/ Tom Rowan 9/8/96
Thomas J Rowan
600 Bourke Street, MELBOURNE
A Solicitor holding a current
Practising Certificate under the
Legal Profession Practice Act 1958.
[LETTERHEAD]
<PAGE>
INDEX
CLAUSE PAGE
- ------ ----
NO.
- -----
1. DEFINITIONS AND INTERPRETATION 2
2. SALE OF BUSINESS ASSETS 9
3. CONSIDERATION 9
4. CONDITIONS PRECEDENT 10
5. STOCK TAKE 11
6. COMPLETION 12
7. EXPERT DETERMINATION 14
8. TRANSFERRING EMPLOYEES 14
9. BUSINESS CONTRACTS AND TRANSFERRED LEASES 16
9A. BUSINESS CONTRACTS 16
9B. TRANSFERRED LEASES 17
10. BUSINESS LIABILITIES AND INDEMNITIES BY THE
PURCHASER, THE VENDOR AND THE AUSTRALIAN VENDORS 17
11. CHANGE OF NAME 19
11A. RESTRAINT 20
12. ACCOUNTS RECEIVABLE 21
13. RIGHTS AND OBLIGATIONS PENDING COMPLETION 23
14. WARRANTIES 23
15. SUPERANNUATION 25
16. ACCESS TO BUSINESS RECORDS 26
17. JOINT AND SEVERAL LIABILITY 26
18. CONFIDENTIALITY 26
19. GENERAL 27
20. AUSTRALIAN VENDORS' GUARANTEE & INDEMNITY 30
<PAGE>
- 2 -
SCHEDULE 1 - BUSINESS CONTRACTS
SCHEDULE 2 - BUSINESS RECORDS
SCHEDULE 3 - INDUSTRIAL AND INTELLECTUAL PROPERTY
SCHEDULE 4 - PLANT AND EQUIPMENT
SCHEDULE 5 - TRANSFERRING EMPLOYEES
SCHEDULE 6 - TRANSFERRED LEASES
SCHEDULE 7 - INDUSTRIAL AND INTELLECTUAL PROPERTY DEED OF ASSIGNMENT
SCHEDULE 8 - WARRANTIES AND REPRESENTATIONS
SCHEDULE 9 - DUE DILIGENCE DISCLOSURE
SCHEDULE 10 - EMPLOYEE BENEFIT PLANS
<PAGE>
ASSET SALE AGREEMENT
THIS AGREEMENT is made the 9th day of August 1996.
BETWEEN
RECOIL INC. of 1051 Third Avenue, SW, Indianapolis, Indiana, United States
("the Vendor")
AND
KAYNAR TECHNOLOGIES INC. of 800 State College Boulevarde, Fullerton,
California, United States ("the Purchaser")
AND
RECOIL PTY LTD ACN 006 664 731 of 20 Stamford Road, Oakleigh, Victoria,
("Recoil")
AND
ADVENT LIMITED ACN 006 509 708 of 6th Floor, 410 Collins Street, Melbourne
("AL")
AND
AUSTRALIAN PACIFIC TECHNOLOGY LIMITED ACN 006 212 764 of 6th Floor, 410
Collins Street, Melbourne ("APT")
AND
WESTERN PACIFIC INVESTMENT COMPANY LIMITED ACN 006 254 502 of 6th Floor,
410 Collins Street, Melbourne ("WPI")
(and AL, APT and WPI are called "the Advent Group")
AND
MR B. PRICE of 59 Glyndon Road, Camberwell, Victoria ("Mr Price")
AND
B. PRICE HOLDINGS PTY LTD ACN 073 779 352 of 59 Glyndon Road, Camberwell,
Victoria ("BPH");
AND
LENARDE PTY LTD 005 846 597 of 59 Glyndon Road, Camberwell, Victoria
("Lenarde")
(and Mr Price, BPH and Lenarde are called "the Price Interests").
WHEREAS:
A. The Vendor has employed the Business Assets in the US Business in the
United States of America.
B. The Australian Vendors have employed the Australian Assets in the
Australian Business in Australia.
<PAGE>
- 2 -
C. The Vendor has agreed to sell, and the Purchaser has agreed to purchase
from the Vendor, the Business Assets upon the terms and conditions of this
Agreement.
D. The Australian Vendors have agreed to sell to the Australian Purchasers,
and the Australian Purchasers have agreed to purchase from the Australian
Vendors, the Australian Business Assets upon and subject to the terms and
conditions of the Australian Asset Sale Agreement.
NOW IT IS AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following
terms have the following meanings:
(a) "Accounts" has the same meaning ascribed to that term in the
Australian Asset Sale Agreement;
(b) "Accounts Receivable" means any debt due to the Vendor at the
Effective Date or to become due to it at some future time on account
of the US Business carried on by it at any time up to the Effective
Date;
(c) "Australian Asset Sale Agreement" means the agreement between the
Vendor, the Australian Purchasers, Mr B. Price and the Australian
Vendors relating to the sale to the Australian Purchasers of the
Australian Business;
(d) "Australian Assets" means the assets to be sold by the Australian
Vendors to the Australian Purchasers under the Australian Asset Sale
Agreement;
(e) "Australian Business" means the business of manufacturing and selling
helically wound threads and thread insert kits carried on by Recoil
Pty Ltd in Australia, the assets of which will be owned by the
Australian Vendors in the manner described in the Recitals to the
Australian Asset Sale Agreement;
(f) "Australian Purchasers" means the Purchaser and RCL Pty ACN 073 750
428;
(g) "Australian Vendors" means Recoil, the Advent Group, BPH and Lenarde;
(h) "Bank Rate" means the prime rate of interest as set forth from time to
time in the Wall Street Journal;
<PAGE>
- 3 -
(i) "Business Assets" means each of the:
(i) Accounts Receivable;
(ii) Business Contracts;
(iii) Business Records;
(iv) Industrial and Intellectual Property;
(v) Plant and Equipment;
(vi) Stationery and Supplies;
(vii) Inventory; and
(viii) Transferred Leases,
(ix) Licences
and all other assets directly associated with and of benefit to the
ongoing US Business;
(j) "Business Contracts" means, subject to clause 6.3, each of the
contracts entered into by the Vendor in the US Business including,
without limitation, those more particularly described in Schedule 1,
all of which are owned by the Vendor;
(k) "Business Day" means any day on which the majority of banks carrying
on business in the cities of Melbourne, Australia, and Los Angeles,
California, are open for business;
(l) "Business Liabilities" means:
(i) The actual liabilities of the Vendor relating to the US Business
as at the Effective Date disclosed in the Accounts; and
(ii) Any Claim of a Transferring Employee for or in respect of
severance or termination of employment the subject of the
indemnity from the Purchaser under clause 8.6,
but excluding the Excluded Liabilities;
(n) "Business Records" means each of the records of the Vendor including,
without limitation, those more particularly described in Schedule 2,
all of which are owned by the Vendor;
(o) "Claim" means any claim or cause of action in contract, tort, under
statute or otherwise;
<PAGE>
- 4 -
(p) "Completion Date" has the meaning ascribed to that term under the
Australian Asset Sale Agreement;
(q) "Effective Date" has the meaning ascribed to that term under the
Australian Asset Sale Agreement;
(r) "Employee Benefit Plans" means the retirement, medical and dental
plans for the benefit of employees set out in Schedule 10;
(s) "Encumbrance" means a mortgage, Claim, security, interest, title
defect, charge, pledge, lien, option, restriction as to transfer, use
or possession, easement, subordination to any right of any other
person, or other encumbrance, but does not include a lien arising as a
matter of law or title retention in respect of Inventory which lien or
title retention will be discharged by payment of the Business
Liabilities to be assumed by the Purchaser, but excludes any right
arising under the so called Bulk Sales Laws;
(t) "Excluded Liabilities" means each of the following liabilities of the
Vendor, and whether existing on, or after, the Effective Date:
(i) Any amount owed by the Vendor to Recoil Pty Ltd disclosed in the
Accounts;
(ii) Any cost and expense incurred by the Vendor and any liability of
the Vendor arising in relation to:
A. This Agreement; and
B. The liquidation of the Vendor,
including, but not limited to, the cost of the Vendor's Auditor
of performing any function under clause 7, any legal fees,
accountant's fees, tax advisers' fees, other consultants' fees
and Taxes, and whether of an income or capital nature;
(iii) Any liability of the Vendor to pay income taxes under the Income
Tax Assessment Act 1936 (Commonwealth of Australia) and the US
Internal Revenue Code of 1986, as amended, and any regulation
promulgated thereunder, and any US state income taxes;
(iv) Any liability which is not a Business Liability;
<PAGE>
- 5 -
(v) Any liability not disclosed in the Accounts resulting from or
under any employee benefit plan of the Vendor whether to current
employees, former employees, retired employees or other persons
entitled to receive payments under such plans or the
beneficiaries of any of the foregoing;
(vi) Any liability not disclosed in the Accounts with respect to
Claims, investigations or arbitration or other litigation pending
on the Effective Date or which arises on or after the Effective
Date as a result of events occurring prior to the Effective Date;
(vii) Subject to clause 8, any liability arising out of Claims by
Transferring Employees which are not fully indemnified under
workers' compensation insurance pending on the Effective Date (or
which arise after the Effective Date but are based on facts or
circumstances occurring prior to the Effective Date), including
but not limited to Claims for unpaid salary and wages, bonuses,
violation of any industrial award or workplace or employment or
collective agreement, unfair work practices, working condition,
violation of equal opportunity or race discrimination
legislation, Taxes, violation of workplace health and safety
legislation or sick leave entitlements;
(viii) Any liability arising from Claims brought by former employees of
the Vendor who are not Transferring Employees;
(ix) Any product liability Claims arising from or related to any
product manufactured by the Vendor prior to the Effective Date,
subject to the Purchaser maintaining product liability insurance
at least equivalent to that maintained by the Vendor as at the
Effective Date;
(x) Any liability in respect of a violation or contravention by the
Vendor or any of its directors or officers of any environmental
law or any licences, approvals, consents, permissions or permits
issued under any environmental law;
(xi) Any liability as a result of events occurring prior to the
Effective Date in respect of any pollution, contamination or any
hazardous or toxic spill, leak or discharge of whatever nature
affecting any land (including the property listed in Part A of
Schedule 6 and any other premises or
<PAGE>
- 6 -
facility owned, occupied, or used by the Vendor) including any
liability:
A. Under any notice, direction or order issued by any
government or semi-government body to clean up,
decontaminate or take remedial action to make good under any
environmental law;
B. Arising from any Claim concerning property damage or
personal injury or death; or
C. In respect of the generation, treatment, storage, release or
disposal or any hazardous material,
but excluding any liability as a result of subsidence on any of
the properties referred to in this paragraph (xi);
(xii) Any liability in connection with any violation or alleged
violation of any law by the Vendor;
(xiii) For a period of two years from the Completion Date, in respect of
any Claims relating to the infringement by the Vendor of third
party rights and the infringement of such rights by the Purchaser
as a result of the use by the Purchaser of the Trademarks
described in Schedule 3; and
(xiv) Any liability in respect of the Vendor's failure to comply with
any bulk sales laws applicable to the transactions contemplated
by this Agreement but excluding any liability as a result of the
Purchaser's failure to discharge Business Liabilities as provided
in clauses 3.1(a) and 10.1(b);
(u) "Industrial and Intellectual Property" means all industrial and
intellectual property of the US Business, including without
limitation:
(i) All patents and patent applications;
(ii) All copyright, industrial designs, inventions, trade secrets,
confidential information and knowhow and all other intellectual
property used in connection with the US Business, all of which,
registered or not, are owned by the Vendor; and
(iii) All customer lists,
and including all rights to use the Trademarks, research and
development, and all of the goodwill of
<PAGE>
- 7 -
the US Business including the right for the Purchaser to represent
itself as carrying on the US Business as the successor of the Vendor;
(v) "Inventory" means the stock used in the US Business on the Effective
Date, including, but not limited to, stock in transit, raw materials,
components, work in progress, finished goods, partly finished goods,
spare parts, consumables, pallets and packaging material, all of which
are owned by the Vendor;
(vA) "Licences" means all licences, permits, consents and approvals from
government and non-government entities;
(w) "Loss" means any damage, loss, cost, Claim, liability, charge,
expenses, diminution in value or deficiency of any kind or character
(including loss of property or expected profit);
(x) "Plant and Equipment" means, all plant and equipment used in the US
Business on the Effective Date including, without limitation and
subject to clause 6.3, the plant and equipment described in Schedule
4, including all plant and equipment under construction, all of which
is owned by the Vendor;
(y) "Purchase Price" means: $1,875,000;
(z) "Purchaser's Auditor" means Arthur Andersen;
(aa) "Stationery and Supplies" means all stationery and supplies used in
the US Business on the Effective Date including, without limitation,
advertising material, samples, catalogues, brochures, consumables,
spare parts and tools, all of which are owned by the Vendor;
(aaA) "Tax" and "Taxes" means:
(i) All taxes levied, imposed or assessed under the Internal Revenue
Code of 1986, as amended, and the regulations promulgated
thereunder or any other statute, ordinance or law, in the United
States of America;
(ii) All taxes levied, imposed or assessed under the tax legislation,
or any other statute, ordinance or law, in Australia, the United
Kingdom, Belgium, France or elsewhere;
(iii) Taxes in the nature of sales tax, excise, consumption tax, value
added tax, payroll tax, group tax, pay as you earn tax, franchise
tax, personal property tax, transfer tax, gross
<PAGE>
- 8 -
receipt tax, capital stock tax, production tax, business and
occupation tax, disability tax, severance tax, superannuation
contributions, workers' compensation contributions, social
security, pension fund and other obligatory contributions
undistributed profits tax, fringe benefits tax, recoupment tax,
withholding tax, land tax, water rates, municipal rates, stamp
duties, gift duties or other foreign, national, state,
territorial, Commonwealth, local or municipal taxes, charges or
impositions levied, imposed or collected by any government body
in Australia, the United States of America, the United Kingdom,
Belgium, France or elsewhere,
together with any additional tax, interest, penalty, charge, fee or
other amount of any kind assessed, charged or imposed and any loss in
connection with the determination, settlement or litigation of any Tax
liability;
(bb) "Trademarks" means all of the trademarks of the US Business including,
without limitation:
(i) Each and every trademark of the Vendor which is registered or for
which an application is pending;
(ii) Such unregistered rights of the Vendor as may exist through use,
including trademarks, trade dress, brand names, logos and other
names and slogans embodying goodwill associated with any product;
and
(iii) Any goodwill incidental to such trademark used by or on behalf of
the Vendor in relation to the US Business including, without
limitation, the trademarks described in Schedule 3;
(cc) "Transferred Leases" means, subject to clause 6.3, the leases of the
real property described in Schedule 6 entered into by the Vendor;
(dd) "Transferring Employees" means, subject to clause 6.3, the persons
more particularly described in Schedule 5;
(ee) "US Business" means the business of selling helically wound thread and
thread insert kits carried on by the Vendor in the United States of
America; and
(ff) "Vendor's Auditor" means Bird Cameron Partners;
<PAGE>
- 9 -
1.2 In this Agreement, unless the context otherwise requires:
(a) Words importing one gender shall include the other and neuter genders;
(b) Persons shall include corporations and vice versa;
(c) The singular number shall include the plural number and vice versa;
(d) A reference to any statute or regulation or other law includes a
reference to that statute, regulation or other law as modified,
amended, or re-enacted from time to time, and any reference to any
provision thereof is to that provision as so modified, amended or
re-enacted; and
(e) A reference to $ and dollars is a reference to the lawful currency of
Australia.
1.3 Headings used herein are inserted for ease of reference and shall not
affect in any way the meaning of this Agreement.
1.4 References to clauses, sub-clauses and paragraphs are references to
clauses, sub-clauses and paragraphs of this Agreement and a reference to
this Agreement includes the Schedules to this Agreement.
2. SALE OF BUSINESS ASSETS
On the Completion Date, but with effect from the Effective Date:
(a) The Vendor, as legal and beneficial owner of the Business Assets
hereby sells, assigns and transfers to the Purchaser, free from all
Encumbrances; and
(b) The Purchaser hereby purchases and has assigned and transferred from
the Vendor the Business Assets,
upon and subject to the terms and conditions of this Agreement, it being
the intention of the parties that the Purchaser shall become the legal and
beneficial owner of the Business Assets on and from the Effective Date and
be entitled to the rights and obligations in relation to the Business
Assets from the Effective Date.
3. CONSIDERATION
3.1 The consideration for the sale and purchase of the Business Assets shall be
the:
<PAGE>
- 10 -
(a) Assumption by the Purchaser of the Business Liabilities on the
Completion Date, but with effect from the Effective Date; and
(b) Payment by the Purchaser to the Vendor of the Purchase Price on the
Completion Date.
3.2 The Purchase Price shall be applied as follows:
(i) Accounts Receivable, the face value of the Accounts Receivable shown
in the Accounts, less all proper provisions in the Accounts for bad
and doubtful debts;
(ii) Business Records, $1.00;
(iii) Plant and Equipment, the written down book value for taxation
purposes;
(iv) Stationery and Supplies, $1.00;
(v) Inventory, the amount determined in accordance with clause 5;
(vi) Transferred Leases, $1.00;
(vii) Licences and all other Business Assets, $1.00; and
(viii) Business Contracts and Industrial and Intellectual Property, the
balance,
and the Purchaser, the Vendor and the Australian Vendors each agree to
file U.S. Internal Revenue Service Form 8594, and all federal, state,
local and foreign tax returns, in accordance with the above
calculation and allocation of the Purchase Price.
3.3 The Purchaser shall pay the Vendor the Purchase Price, on the Completion
Date by bank cheque.
3.4 All amounts to be calculated and paid in accordance with this clause 3
shall be rounded down to the nearest whole dollar.
4. CONDITIONS PRECEDENT
4.1 This Agreement is conditional upon the satisfaction on or prior to the
Completion Date of these conditions precedent that on or prior to the
Completion Date:
(a) The Vendor, the Australian Vendors, Mr B. Price and the Australian
Purchasers:
<PAGE>
- 11 -
(i) Execute the Australian Asset Sale Agreement; and
(ii) The sale and purchase under the Australian Asset Sale Agreement
completes in accordance with its terms;
(b) There has not been any material adverse change to the financial
condition of the US Business since the date of execution of this
Agreement; and
(c) The Purchaser obtains the consent of the lessor under the lease of the
real property described in Part A of Schedule 6 to the assignment of
that lease to the Purchase;
(d) The Purchaser has completed to its satisfaction a due diligence
investigation of the Business Assets and the Business Liabilities.
4.2 The parties shall take such practical steps and use best endeavours as may
be within their respective powers to enable the conditions precedent set
out in clause 4.1 to be fulfilled on or prior to the Completion Date.
4.3 Subject to clause 4.4, if the conditions precedent set out in clause 4.1
are not fulfilled as at 15 August 1996, or such other date as the parties
may agree, then any party may, at any time after that date, by written
notice to the others, give two (2) Business Days' notice of intention to
terminate this Agreement, and if the conditions precedent are not fulfilled
as at the expiration of that notice, or, if no notice is given within that
two (2) Business Day period, no party shall be under any obligation to any
other party under this Agreement other than in respect of any antecedent
breach.
4.4 A party may not terminate this Agreement if it relies on the non-fulfilment
of any condition in respect of which it is in breach of its obligation
under clause 4.2.
4.5 The conditions precedent set out in clause 4.1 have been included for the
benefit of each party to this Agreement, and the conditions precedent may
only be waived in whole or in part with the consent of each of the parties.
5. INVENTORY VALUATION
5.1 For the purposes of determining the amount of the Purchase Price to be
applied to Inventory, under clause 3.2, the Vendor shall determine the
value of Inventory not more than seven (7) days after the Completion Date
in accordance with this clause 5.
<PAGE>
- 12 -
5.2 All Inventory shall be valued at the lower of cost and fair market value,
and costs are to be assigned on a first in first out basis and include
direct materials, direct labour and an appropriate portion of variable and
fixed overhead expenses.
5.3 A valuation of all Inventory shall be taken in the presence of a
representative of the Vendor and the Vendor's Auditor, and a representative
of the Purchaser and the Purchaser's Auditor.
5.4 Any dispute as to the quantity or value of Inventory shall be determined at
the request of either the Vendor or the Purchaser in accordance with clause
7.
6. COMPLETION
6.1 Completion of the sale and purchase of the Business Assets shall take place
on the Completion Date at the office of the Vendor's solicitors, Norton
Smith Gledhill, Level 23, 459 Collins Street, Melbourne, Victoria,
Australia, or at such other place as the parties may agree, at which time
all the Vendor's right, title and interest in and to the Business Assets
shall pass to the Purchaser. The Vendor, until completion of the sale and
purchase of the Business Assets remains the owner of and bears all risks in
connection with the Business Assets. On the Completion Date the risk in
the Business Assets passes to the Purchaser.
6.2 The Vendor shall, at completion, deliver to the Purchaser, and the
Purchaser shall accept delivery of:
(a) The Business Assets and title to them;
(b) All deeds, instruments of transfer and other documents, notices,
certificates and consents (in a form satisfactory to the Purchaser)
reasonably necessary to effect the transfer of the legal and
beneficial ownership of the Business Assets free of all Encumbrances
to the Purchaser, including:
(i) Assignments or novations of the Transferred Leases, together with
all appropriate consents;
(ii) A deed of assignment in the form set out in Schedule 7 of all
Industrial and Intellectual Property;
(iii) If necessary, to enable transfer of registration of any motor
vehicle to the Purchaser, titles to motor vehicles executed for
transfer; and
<PAGE>
- 13 -
(iv) written consent by the Vendor to the use by the Purchaser of the
company name "Recoil";
(c) All consents in a form reasonably acceptable to the Purchaser to the
assumption of the Business Liabilities by the Purchaser under this
Agreement; and
(d) Written opinions in a form approved by General Electric Capital
Corporation from the legal advisers to the Vendor, the Australian
Vendors and the Purchaser; and
the Vendor shall sign such transfers and other forms as are produced to it
by the Purchaser as are required to transfer the existing services of the
US Business, (including telephone, facsimile, electricity and gas) to the
Purchaser.
6.3 The Vendor shall, at completion, deliver to the Purchaser written notice of
any:
(a) Items of Plant and Equipment listed in Schedule 4 which have then been
disposed of;
(b) Items of Plant and Equipment which are then additional to the Plant
and Equipment listed in Schedule 4;
(c) Business Contracts listed in Schedule 1 which have then been
terminated;
(d) Business Contracts which are then additional to the Business Contracts
listed in Schedule 1;
(e) Transferred Leases listed in Schedule 6 which have then been
terminated;
(f) Transferred Leases which are then additional to the Transferred Leases
listed in Schedule 6;
(g) Transferring Employees who are then no longer employees of the Vendor;
and
(h) Any additional persons not listed as Transferring Employees who have
become employees of the Vendor,
and any such item of Plant and Equipment, Business Contract and Transferred
Lease shall be taken to be excluded or included (as the case may be) in
Schedules 4, 1 and 6 (as the case may be), and any such person shall be
taken to be, or not to be, (as the case may be) a Transferring Employee.
6.4A For the purpose of clarity, the parties acknowledge and agree that if the
Vendor gives notice under clause 6.3 the giving of that notice shall be
taken for the purposes of
<PAGE>
- 14 -
clause 14.4 to make the Purchaser aware of a matter which arises after the
date of this Agreement and is inconsistent with a warranty or
representation made elsewhere in this Agreement by the Vendor, and the
Purchaser shall be entitled to the rights given by that clause 14.4.
6.4 The Purchaser shall pay all state taxes, other than US state income taxes,
and other transfer taxes which become due because of the completion of this
transaction.
6.5 The obligations of the parties in relation to completion are interdependent
so that the Purchaser is not obliged to complete the purchase of the US
Business unless the purchase of all of the Business Assets is completed
simultaneously, and all actions at completion take place simultaneously and
no delivery or payment is to be taken to have been made until all
deliveries and payment have been made.
7. EXPERT DETERMINATION
7.1 The determination of any matter in respect of which the Vendor and the
Purchaser, or the Vendor's Auditor and the Purchaser's Auditor, are unable
to agree under clause 5 shall be referred at the request of the Vendor or
the Purchaser to an independent chartered accountant agreed to by them, and
failing agreement within two (2) Business Days of a request being made
therefor, by an independent chartered accountant nominated by the President
for the time being of the Institute of Chartered Accountants or the
successor of that body who shall, in any case, be appointed on terms that
he shall make his determination within fourteen (14) days of his
appointment.
7.2 The independent chartered accountant shall act as an expert and not as an
arbitrator, and the costs of making any determination shall be borne by the
Vendor and the Purchaser equally.
7.3 Any determination made by the independent chartered accountant shall be
binding on the parties.
7.4 The parties shall use their best endeavours to procure the independent
chartered accountant to make his determination within fourteen (14) days of
his appointment.
8. TRANSFERRING EMPLOYEES
8.1 The Purchaser shall, on or before the Completion Date, offer to each of the
Transferring Employees employment with the Purchaser on terms as to salary
and financial benefits no less favourable than the terms under which each
is
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employed by the Vendor in conducting the US Business on the Effective Date
(as the case may be) being the terms disclosed to the Purchaser prior to
the date of this Agreement.
8.2 The Purchaser covenants with the Vendor that in respect of all Transferring
Employees the Purchaser shall:
(a) Abide by the terms and conditions of the offer of employment made
under clause 8.1; and
(b) Indemnify the Vendor for any Loss suffered or incurred by it and any
Claim made against it in respect of all Transferring Employees:
(i) Occasioned by the Purchaser's failure to observe those terms and
conditions of employment; and
(ii) Subject to clause 8.4, who do not accept those terms and
conditions.
8.3 The Vendor and the Purchaser shall use their best endeavours to encourage
all Transferring Employees to accept the offers made by the Purchaser under
clause 8.1.
8.4 The Vendor shall pay on the Completion Date all Transferring Employees who
do not accept the offer of employment made under clause 8.1, all amounts
due and owing to them in respect of accrued salary or wages, holiday pay
and long service leave pay, but not any Claim for or in respect of
severance or termination of employment, and the Vendor and the Australian
Vendors shall:
(a) Pay, and indemnify the Purchaser in respect of, any Claim for workers'
compensation and any common law Claim arising from any injury to those
Transferring Employees, but not any Claim for, or in respect of,
severance or termination of employment; and
(b) Indemnify the Purchaser with respect to any non-compliance by the
Vendor with the U.S. Worker Adjustment and Retraining Notification
Act.
8.5 The Vendor shall, on the Completion Date, release all Transferring
Employees employed by it from employment by it.
8.6 On and from the Effective Date the Purchaser shall, subject to clause 8.4:
(a) Pay all Transferring Employees all amounts due to them on and from the
Effective Date as and when they fall due; and
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(b) Indemnify the Vendor against any liability for any Claim for any
amount due to or accrued by all employees on or after the Effective
Date,
and whether the amount or liability accrued prior to the Effective Date, it
being the intention of the parties that the Purchaser shall be responsible
for and pay all amounts disclosed in the Accounts as accrued but not then
due to employees on the Effective Date for salary or wages, holiday pay and
long service leave pay and other severance or termination pay other than
that to be paid by the Vendor under clause 8.4 (whether or not disclosed in
the Accounts).
9. BUSINESS CONTRACTS AND TRANSFERRED LEASES
9.1 With effect on and from the Effective Date, the Purchaser assumes
responsibility for the performance of:
(a) The Business Contracts; and
(b) The Transferred Leases,
("all agreements") and agrees to indemnify and save harmless the Vendor on
and from the Effective Date from all Claims and Losses relating to all
agreements arising from matters or things done or omitted to be done on or
from the Effective Date.
9.2 The Purchaser shall be entitled, on and from the Effective Date, to the
rights and benefits arising under or in relation to all agreements.
9.3 The Vendor and the Australian Vendors agree to indemnify and hold harmless
the Purchaser on and from the Effective Date, from all Claims and Loss
relating to all agreements entered into by the Vendor arising from matters
or things done, or omitted to be done, at any time up to and including the
day before the Effective Date and not included in the definition of
Business Liabilities.
9A. BUSINESS CONTRACTS
9A.1 The Vendor shall assign to the Purchaser each and every Business
Contract,with effect from the Effective Date. If any other party to any
Business Contract objects to such assignment the Purchaser may elect for
the provisions of clause 9A.2 to apply.
9A.2 The Vendor, and the Australian Vendors undertake to the Purchaser, in the
situation where any third party to a
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Business Contract objects to or refuses to consent to an assignment of a
Business Contract to:
(a) Duly perform the contract with the assistance of such employees and
materials of the Purchaser which the Purchaser shall make available as
and when necessary at no expense to the Vendor;
(b) Delegate management to the Purchaser if it is reasonably possible to
do so;
(c) Enforce the contract against the other party or parties to the
relevant Business Contract in such a manner as the Purchaser may
direct from time to time, at no expense to the Vendor;
(d) Not agree to any amendment to the Business Contract or waiver of the
Vendor's rights under the relevant Business Contracts without the
prior written consent of the Purchaser; and
(e) Pay to the Purchaser forthwith all moneys received by the Vendor for
goods and services supplied by the Vendor in respect of the
performance by it of the relevant Business Contracts.
9B. TRANSFERRED LEASES
9B.1 The Vendor shall assign (with the written consent of each of the lessors)
the Transferred Leases to the Purchaser with effect from the Effective
Date.
9B.2 If any of the Transferred Leases have not been effectively assigned to the
Purchaser at completion the Purchaser may require that the Vendor at its
own cost (save in respect of registration fees and the Purchaser's legal
costs) take such action as may be reasonably necessary to procure the
assignment of such Transferred Leases to the Purchaser on terms which are
not materially adversely different from those in force at the date of
execution of this Agreement.
10. BUSINESS LIABILITIES AND INDEMNITIES BY THE PURCHASER, THE VENDOR AND THE
AUSTRALIAN VENDORS
10.1 Subject to clause 10.2 the Purchaser covenants to indemnify and keep
indemnified the Vendor:
(a) From all Claims and Losses brought or made against the Vendor in
connection with the use of the Business Assets on and from the
Effective Date that arise on or after the Effective Date; and
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(b) In respect of the Business Liabilities.
10.2 Subject to clauses 8.6, 10.2A and 10.2B, the Vendor and the Australian
Vendors indemnify the Purchaser in respect of all Losses and Claims which
either or both:
(a) Are incurred in connection with the use of the Business Assets prior
to the Effective Date; or
(b) Relate to the Excluded Liabilities,
and are not Business Liabilities PROVIDED HOWEVER THAT in the case of an
Excluded Liability of the kind referred to in paragraph (xiii) of the
definition of Excluded Liabilities in clause 1.1, the Vendor and the
Australian Vendors shall not be required to indemnify the Purchaser under
this clause 10.2 if the Purchaser:
(c) During the two year period referred to in paragraph (xiii) of the
definition of Excluded Liabilities in clause 1.1, has failed to take
reasonable steps as a result of which the Trademarks described in
Schedule 3 may be declared void, voidable, invalid or subject to
removal or expungement; and
(d) Has not taken all reasonable steps to mitigate all Loss arising as a
result of any Claim of the kind referred to in paragraph (xiii) of the
definition of Excluded Liabilities in clause 1.1.
10.2A The Vendors and the Australian Vendors shall not be required to indemnify
the Purchaser under clause 10.2 for any Claim or Loss where the amount of
the liability for all Vendors and the Australian Vendors in aggregate in
respect of all Claims and Losses is more than the Purchase Price.
10.2B The Purchaser shall not bring any action under clause 10.2 in respect of
any Claim or Loss unless the aggregate amount of all Claims and Losses
incurred by them exceeds $100,000 and the Vendors and the Australian
Vendors shall only be liable to the Purchaser in respect of the Claim or
Loss to the extent that the aggregate amount of all Claims and Losses
exceeds $100,000.
10.3 The Vendor and the Australian Vendors hereby indemnify and holds harmless
the Purchaser in respect of any Claim or Loss made against the Purchaser
in respect of the sale or provision of Inventory by the Purchaser on or
after the Effective Date.
10.4 If the Purchaser or the Vendor is seeking indemnification (the party
seeking indemnification to be referred to as the "Indemnified Party") and
desires to make a Claim against the other party or parties for
indemnification (the
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"Indemnifying Party") under this clause 10, the Indemnified Party shall,
within thirty (30) days after the Indemnified Party becomes aware of a
Claim by notice or knowledge, notify the Indemnifying Party in writing of
any Claim or demand as to which the Indemnified Party is entitled to claim
indemnification, the clause under this Agreement with respect to which such
Claim is being made and, to the extent known, the amount and circumstances
surrounding such Claim. In the event that Claim is a third party Claim
against an Indemnified Party or involves a Claim by or liability involving
a governmental authority, the Indemnifying Party shall have the right to
employ counsel of its choice to defend any such Claim or demand PROVIDED
HOWEVER THAT:
(a) The Indemnified Party is kept fully informed of all developments and
is furnished copies of all relevant papers;
(b) The Indemnifying Party diligently prosecutes the defence; and
(c) The Indemnified Party shall have the right to participate, at its own
undertaking and through counsel selected by it, in the defence of any
such Claim. If the conditions of the foregoing proviso are not met, or
the Indemnifying Party chooses not to control the defence, the
Indemnified Party shall assume and control the defence of such third
party Claim or suit at the expense of the Indemnifying Party. The
Indemnifying Party, or, if the conditions to the foregoing proviso are
not met, the Indemnified Party, shall have the right to pay,
compromise or settle any such third party Claim with the consent of
the Indemnifying Party, which consent shall not be unreasonably
withheld.
10.5 Unless otherwise provided in this Agreement, each indemnity given under
this Agreement continues indefinitely and the party to whom the benefit of
an indemnity is given shall be kept indemnified.
11. CHANGE OF NAME
11.1 The Vendor shall, on or before the Completion Date change its name from
Recoil Inc to some other dissimilar name, not incorporating the word
"Recoil".
11.2 The Vendor covenants with the Purchaser that the Vendor shall not, after
the Completion Date, use the name Recoil or any similar name in the conduct
of any business of it or otherwise PROVIDED HOWEVER that the Vendor shall
be entitled to use the name Recoil to designate its name until
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such time as the Secretary of the State of Indiana has issued a
certificate of change of name.
11.3 The Vendor covenants with the Purchaser that:
(a) The Vendor shall change its name in accordance with clause 11.1; and
(b) The Purchaser shall be entitled to use the name Recoil or any similar
name as the name of the Purchaser.
11A. RESTRAINT
11A.1 For the purpose of protecting the Purchaser in respect of the goodwill
associated with the US Business and in consideration of the benefits to be
derived from the sale by the Vendor and the Australian Vendors of the
Business Assets and of the agreement evidenced by this Agreement, each of
the Vendor and the Australian Vendors ("the restricted party") covenants
severally with the Purchaser that it shall not:
(a) For the period from the date of this Agreement specified below:
(i) In the case of the Price Interests, and Recoil, three (3) years;
and
(ii) In the case of the Advent Group, one (1) year; and
(b) In the area specified below:
(i) Australia;
(ii) The European Union; and
(iii) The United States of America,
(either directly or indirectly) be concerned with or interested in any
undertaking or business in competition with the US Business PROVIDED
HOWEVER that this clause shall not prevent any restricted party from
holding or being otherwise interested as principal in stocks, shares,
units or securities of any company or trust ("securities"), which
securities represent less than 10% in number of the securities on issue in
any such company or trust and which securities are listed for quotation on
any stock exchange.
11A.2 During the period referred to in clause 11A.l(a), the restricted parties
shall not on their own account or for any other person:
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(a) Induce or attempt to induce any employee to leave the employment of
the Purchaser;
(b) Induce or attempt to induce any customer away from the Purchaser; or
(c) Induce or attempt to induce any supplier or financier away from the
Purchaser.
11A.3(a) Each of the covenants contained in clause 11A.l is to be construed as
a separate independent covenant severable from all other covenants
contained in clause 11A.1. If any of the covenants is found to be
void, invalid or otherwise unenforceable, such unenforceability does
not affect the validity or enforceability of any of the separate
covenants.
(b) It is intended by the parties that restraints contained in this clause
operate to the maximum extent except that, if any of the prohibitions
or restrictions is judged to go beyond what is reasonable in the
circumstances, but would be judged reasonable if the period or area
were reduced, then the prohibitions or restrictions apply with that
period or area reduced by the minimum amount necessary.
(c) The restricted party acknowledges that the duration, extent and
application of the respective restrictions contained in this clause
are not greater than is reasonably necessary for the protection of the
interests of the Purchaser and the preservation of the goodwill
acquired under this Agreement, but that, if such restriction is
adduced by any court of competent jurisdiction to be void or
unenforceable but would be valid if part of the wording of this clause
was either or both deleted or the period was reduced, those
restrictions apply with such modification as may be necessary to make
this clause valid and effective.
(d) In the event of any breach by the restricted party of its obligations
under this clause then, in addition and without prejudice to any other
remedy which the Purchaser may have, the Purchaser is entitled to seek
and obtain injunctive relief in any court of competent jurisdiction.
12. ACCOUNTS RECEIVABLE
12.1 The parties agree and acknowledge that from the Effective Date the Accounts
Receivable are the property of the Purchaser.
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12.2 On or before the Effective Date, the Vendor shall compile a list of
Accounts Receivable as at the Effective Date detailing the name, address
and amount owing in relation to each Account Receivable and deliver to the
Purchaser a copy of such list.
12.3 Any payment (including any part payment) with respect to any Account
Receivable received by the Vendor on or after the Effective Date shall be
remitted, as soon as practicable, to the Purchaser.
12.4 Any monies collected by the Vendor in respect of trading indebtedness from
or on behalf of any debtor are to be first applied in satisfying the
invoice against which the particular debtor makes payment or if no such
invoice is nominated the collections are to be applied first in satisfying
the debtor's account from whom such collection was received on a first-in
first-out basis, save where a debt is in dispute.
12.5 The Vendor warrants to the Purchaser that the Purchaser will, within 180
days after the Completion Date, recover an amount equal to the total value
of the Accounts Receivable shown in the Accounts, less any provisions in
the Accounts for bad and doubtful debts ("the warranted amount").
12.6 The Vendor and the Australian Vendors indemnify the Purchaser in respect of
any Loss by the Purchaser resulting from the failure by the Purchaser to
recover the warranted amount within that 180 day period, and shall pay to
the Purchaser, within seven (7) days of receiving a written request
therefor, the amount of any such Loss.
12.7 Where the Vendor or the Australian Vendors pay any amount in respect of any
Account Receivable under clause 12.6, the Purchaser shall assign the
corresponding portion of that Account Receivable to the Vendor within seven
(7) days of receipt of that amount, and the Account Receivable shall be the
property of the Vendor.
12.8 The Purchaser covenants with the Vendor and the Australian Vendors that the
Purchaser shall:
(a) Use its reasonable endeavours to collect all Accounts Receivable
within 180 days after the Completion Date; and
(b) Comply with all reasonable requests of the Vendor to provide the
Vendor with information relating to the collection of the Accounts
Receivable.
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13. RIGHTS AND OBLIGATIONS PENDING COMPLETION
13.1 From the date of this Agreement to the Completion Date the Vendor shall:
(a) Ensure that the US Business is conducted in accordance with normal and
prudent practice (having regard to the nature of the US Business);
(b) Use its reasonable commercial endeavours to maintain the profitability
and value of the US Business;
(c) Use the Business Assets with reasonable care;
(d) Not without the prior consent of the Purchaser:
(i) Enter into any material contract or commitment or, other than in
the ordinary course of operating the US Business, incur any
material liabilities; or
(ii) Hire or terminate the employment of any employee or alter the
terms or conditions of employment of the Transferring Employees;
(e) Keep the Business Assets insured on a replacement basis and comply in
all respects with the requirements of all insurance policies
maintained in respect of the Business Assets; and
(f) Consult with the Purchaser on any matters which may have a material
impact on the value or performance of the US Business, or if known as
of the date of this Agreement would have been required to be disclosed
to the Purchaser.
13.2 The Vendor warrants to the Purchaser that the US Business has been
conducted in accordance with paragraphs (a), (b), (c) and (e) of clause
13.1 from 31 December 1995 to the Effective Date.
14. WARRANTIES
14.1 Subject to this Agreement, the Vendor and the Australian Vendors warrant
and represent to the Purchaser the matters set out in the Schedule 8 ("the
warranties"). The Vendor and the Australian Vendors acknowledge that the
Purchaser enters into this Agreement in full reliance on the warranties and
that the warranties have been made with the intention of inducing the
Purchaser to enter into this Agreement.
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14.2 The Vendor and the Australian Vendors warrant and represent to the
Purchaser that the warranties are true, complete and accurate and not
misleading in any way.
14.3 The Vendor and the Australian Vendors shall not be liable for any
inaccuracy or breach of any of the warranties, or any representation made
elsewhere in this Agreement, if the inaccuracy or breach or the facts
giving rise to the inaccuracy or breach is or are actually known to the
Purchaser as a result of any of the:
(a) Due diligence investigation undertaken by the Purchaser prior to the
date of this Agreement; and
(b) Material:
(i) Made available to the Purchaser by the Vendor listed in Schedule
9; or
(ii) Notified to the Purchaser in writing after the date of this
Agreement,
PROVIDED HOWEVER THAT in the case of sub-paragraph (ii) of paragraph (b),
the Purchaser shall be entitled to treat the notification as making it
aware of a matter which, for the purposes of clause 14.4, arises after the
date of this Agreement and is inconsistent with a warranty or
representation made elsewhere in this Agreement by the Vendor, and the
Purchaser shall be entitled to the rights given by that clause 14.4.
14.4 If:
(a) The Vendor, the Australian Vendors or the Purchaser become aware
before the Completion Date of a matter which arises after the date of
this Agreement and is inconsistent with any of the warranties or any
representation made elsewhere in this Agreement, it must immediately
notify the other of them in writing of the matter;
(b) The matter is such as to have a material adverse impact on the US
Business, then the Vendor and the Purchaser must negotiate in good
faith to resolve the issue and, failing an outcome of the negotiations
satisfactory to both parties, either of them is entitled to rescind
this Agreement by giving written notice to the other of them within
five (5) Business Days of becoming aware of the matter, provided that
completion has not already occurred; and
(c) This Agreement is not rescinded pursuant to paragraph (b) of this
clause, then the parties must proceed to completion and the Purchaser
must not bring any Claim
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against the Vendor, or the Australian Vendors in respect of any matter
referred to in paragraph (a), provided that this exclusion does not
apply:
(i) If and to the extent that the matter giving rise to the Claim was
caused by the negligence or wilful default of the Vendor in its
management of the US Business after the date of this Agreement;
or
(ii) If the matter is such as to have a material adverse impact upon
the US Business and the Purchaser was not aware of such matter
before completion.
14.5 The Vendor and the Australian Vendors shall not be liable to the Purchaser
for any Claim in respect of any indemnity, breach of the warranties or of
any representations made elsewhere in this Agreement where either or both:
(a) The Claim is not agreed, compromised or settled, or the Purchaser has
not issued and served legal proceeding against the Vendor within one
(l) year of the Completion Date; and
(b) The amount of the liability of the Vendor in aggregate in respect of
all Claims is more than the Purchaser Price.
14.6 Each of the warranties is given as of the date of this Agreement and the
Completion Date and subject to this Agreement.
14.7 The warranties are taken to be complete immediately before completion with
respect to the facts then existing.
14.8 Subject to clause 14.5, the Vendor and the Australian Vendors covenant to
indemnify and keep indemnified the Purchaser against all liabilities which
may be incurred by the Purchaser as a result (directly or indirectly) of a
breach of any of the warranties.
15. EMPLOYEE BENEFITS
15.1 The Vendor and the Australian Vendors covenant that the Transferring
Employees are members of the employee benefit plans set forth in Schedule
10, and no other employee benefit plans.
15.2 The Vendor and the Australian Vendors covenant with the Purchaser that the
Vendor has complied with the requirements of the Employee Retirement Income
Security Act ("ERISA") with respect to the employee benefit plans set
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forth in Schedule 10 and indemnify and hold harmless the Purchaser from all
Claims and Loss brought or made against the Purchaser in relation to such
matters arising prior to the Effective Date.
16. ACCESS TO BUSINESS RECORDS
On and from the Completion Date, the Purchaser shall provide the Vendor
with access to the Business Records, and to all other the documents and
records of the US Business, and permit them to take copies thereof for the
purposes of enabling them to complete any taxation or other statutory
return, and for all other reasonable commercial purposes.
17. JOINT AND SEVERAL LIABILITY
The obligations and liability of each of the Australian Vendors, Mr Price
and the Vendor under this Agreement are joint and several except in the
case of the obligations and liability of each of the Australian Vendors and
the Vendor arising under clauses 11, 11A and 18, which shall be several
only.
18. CONFIDENTIALITY
18.1 No announcement or communication concerning these terms or conditions of
this Agreement shall be made or authorised by any of the parties to this
Agreement before the Completion Date without the prior written consent of
the other parties, except as permitted by this clause 17.
18.2 A party may disclose anything in respect of this Agreement as required:
(a) By applicable law; or
(b) By any recognised stock exchange on which its shares, or shares of any
related body corporate, are listed for quotation,
but to the extent possible, it shall consult with the other parties before
making the disclosure.
18.3 A party may disclose anything in respect of this Agreement to the officers,
employees and professional advisers of that party and of its related bodies
corporate, but it must use all reasonable endeavours to ensure the matters
disclosed are kept confidential.
18.4 If this Agreement is rescinded or terminated, the Purchaser and Kaynar
covenant with the Vendor to:
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(a) cease using all information and documents provided to it by the Vendor
in relation to this Agreement;
(b) Return that information and those documents and all copies to the
Vendor; and
(c) Keep that information and those documents confidential and not
disclose them to any person.
18.5 The Vendor covenants with the Purchasers not to use or disclose any
confidential information of the Company.
In this clause 18.5 "confidential information of the Company" means
information of every kind concerning or in any way relating to customers,
business transactions, records, financial affairs, trade secrets, technical
information, processes, all inventions and knowhow used in connection with
the US Business other than information in the public domain.
19. GENERAL
19.1 This Agreement is governed by and shall be construed in accordance with the
laws in force in California and the parties submit to the jurisdiction of
the courts of that state including all courts of appeal.
19.2 All representations, warranties, covenants and agreements made herein shall
survive any investigation made and shall survive completion.
19.3 Except as otherwise expressly provided, the provisions of this Agreement
shall enure to the benefit of and be binding upon the successors, heirs,
executors and administrators of the parties hereto.
19.4 Neither this Agreement nor any term thereof may be amended, waived,
discharged or terminated except by written instrument signed by each of the
parties hereto.
19.5 No party may assign its rights or obligations under this Agreement to any
person without the written consent of the other parties, which consent
shall not be unreasonably withheld PROVIDED HOWEVER that the Purchaser may
assign and transfer to General Electric Capital Corporation or any other
provider of financing to the purchaser (collectively, the "Financier") all
of the Purchaser's rights and remedies under and with respect to this
Agreement and any agreements, documents or instruments executed in
connection with this Agreement, including, without limitation, its rights
to any and all amounts payable to the Purchaser under this Agreement, and
each of the other parties to this Agreement hereby consents to such
assignment and transfer
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and agrees to execute and deliver to any such Financier confirmation
thereof.
19.6 The parties shall each bear their own costs and expenses including legal
fees in connection with the negotiation and preparation of this Agreement.
19.7 This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
19.8 This Agreement shall be read and construed subject to all applicable laws
and shall have effect only to the extent permitted thereby. If, but for
this clause, any provision of this Agreement would be unenforceable,
voidable or void it shall be read and construed in such matter as will
preclude it from so being to the intent that such provision shall be read
and construed so as to be valid and enforceable to the greatest extent
possible. Each provision may be so read and construed (or deleted if
necessary) regardless of the effect which that may have on the provision in
question or any other provision or the Agreement as a whole.
19.9 Subject to clause 18.15, time shall be of the essence of this Agreement in
all respects and no extension or variation thereof shall operate as a
waiver of this provision.
19.10 Each party hereto covenants with the other party to do all acts, matters
and things including, without limitation, executing or signing agreements,
deeds or other matters, which are required to be done in order to give
full effect to the provisions of this Agreement and the transactions
contemplated herein.
19.11 Without prejudice to any rights any party may have under this Agreement,
each party agrees to pay to the other on demand interest calculated at the
rate of two percent (2%) above the Bank Rate on any money which is not
paid by one party to the other when payable, which interest paid shall
accrue daily from the date due for payment, until paid.
19.12 Any notice, demand or other communication required to be given or made
hereunder shall, unless otherwise expressly provided, be in writing and be
deemed duly given or made if delivered or sent by prepaid mail or by
facsimile communication as follows:
(a) To the Vendor and the
Australian Vendors at: If delivered or sent by prepaid mail, the
address set out at the beginning of this
Agreement;
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If by facsimile, 61 3 9700561;
(b) To the Purchaser at: If delivered or sent by pre-paid mail,the
address set out the beginning of this
Agreement;
If by facsimile, 0011 1 714 6803153;
or such other address as may be notified by any party to the other and
where served by post shall be deemed served on the second day following
its posting.
19.13 Where, by virtue of the provisions of this Agreement, the day on which
any act, matter or thing is to be done is not a Business Day in the place
in which the act, matter or thing is to be done, such act, matter or thing
shall be done on the next succeeding Business Day.
19.14(a) If any party defaults under this Agreement, no party not in default
shall be entitled to exercise any of its rights arising out of the
default other than its right to sue for money then owing until it has
served the defaulting party with a written notice specifying the
default and its intention to exercise its rights unless the default is
remedied and the proper legal costs caused by the default and any
interest demanded are all paid within five (5) Business Days of
service of the notice or such longer period as may be specified, and
the defaulting party fails to comply with the notice.
(b) If the notice given pursuant to paragraph (a) also states that unless
the default is remedied within the period set out in the notice, the
Agreement will be rescinded pursuant to this clause then, if the
default is not so remedied the Agreement shall thereupon be rescinded.
(c) The provisions of this clauses 19.14 are subject to clause 14.3.
19.15 Each schedule and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
and in combination with the Australian Asset Sale Agreement and the
schedules and exhibits thereto, a letter dated 19 July 1996 from Kaynar
to Mr Brian Ball regarding the payment of European lawyers' costs and a
letter dated 25 July
<PAGE>
- 30 -
1996 from Arthur Andersen regarding the audit of the Company,
constitutes the entire agreement among the parties pertaining to the
purchase and sale of the Business Assets and the Australian Assets and
supersedes all prior understandings, including, but not limited to, the
preliminary agreement dated 15 March 1996 between the Company, Kaynar,
Mr Price, Lenarde and the Advent Group. If there is any inconsistency
between this Agreement and the Australian Asset Sale Agreement with
respect to the sale of the Business Assets under this Agreement, then
the provisions of this Agreement will prevail.
20. AUSTRALIAN VENDORS' GUARANTEE AND INDEMNITY
20.1 The Australian Vendors unconditionally and irrevocably guarantee to the
Purchaser the due and punctual performance of the Vendor's obligations
under this Agreement (including any indemnities given in favour of the
Purchaser).
20.2 As a separate and independent principal obligation, the Australian Vendors
indemnify and hold the Purchaser harmless from and against all Loss
incurred or suffered by the Purchaser, and all Claims made against the
Purchaser as a result of default by the Vendor in the performance of any
such obligation.
20.3 This guarantee and indemnity:
(a) Applies:
(i) To the present and future obligations of the Vendor under this
Agreement;
(ii) To this Agreement as amended, supplemented, renewed or replaced;
(iii) Regardless of whether the Australian Vendors are aware of, or
have consented to, or are given notice of, any amendment,
supplement, renewal or replacement of any agreement to which the
Purchaser and the Vendor are a party or the occurrence of any
other thing; and
(b) Is not affected, nor are the obligations of the Vendor under this
Agreement released or discharged or otherwise affected, by anything
which, but for this provision, must have that effect,
and the obligations of the Australian Vendors hereunder extend to any
change in the obligations of the Vendor as a
<PAGE>
- 31 -
result of any amendment, supplement, renewal or replacement if this
Agreement or the occurrence of any other thing.
20.4 If any payment, conveyance, transfer or other transaction relating to, or
affecting, any obligation of the Vendor under this Agreement are:
(a) Void, voidable or unenforceable under any law relating to bankruptcy,
liquidation or protection of creditors in whole or in part; or
(b) Claimed to be void, voidable or unenforceable under any law relating
to bankruptcy, liquidation or protection of creditors, and that Claim
is upheld, conceded or compromised in whole or in part,
the liability of the Australian Vendors under this guarantee and indemnity
is the same as if:
(c) The payment, transaction, conveyance or transfer or the void, voidable
or unenforceable part of it; and
(d) Any release, settlement or discharge made in reliance on anything
referred to in paragraph (c),
had not been made, and the Australian Vendors must immediately take all
action and sign all documents reasonably necessary or reasonably required
by the Purchaser to restore to it the benefit of this guarantee and
indemnity.
20.5 This guarantee and indemnity is:
(a) A principal obligation and is not to be treated as ancillary or
collateral to any other right or obligation; and
(b) Independent of, and not in substitution for or affected by, any other
collateral security which the Purchaser may hold in respect of the
obligations of the Vendor under this Agreement or any other person,
except that no Claim may be brought under this guarantee and indemnity
unless a written notice of claim in respect of the matter concerned has
been given to the Vendor and the Claim remains unsatisfied seven (7)
Business Days after the giving of that notice.
20.6 This guarantee and indemnity is a continuing obligation of the Australian
Vendors despite any settlement of account, and remains in full force and
effect until:
(a) The obligations of the Vendor under this Agreement have been
performed; or
<PAGE>
- 32 -
(b) This guarantee and indemnity has been fully discharged by the
Australian Vendors.
20.7 The parties acknowledge and agree that all amounts paid, whether under this
clause 20 or as provided elsewhere in this Agreement, shall not exceed the
Purchase Price.
IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and
year first hereinbefore written.
SIGNED for and on behalf of ) /s/ Brian F. Ball
RECOIL INC. by BRIAN F. BALL ). . . . . . . . . . . . . . . .
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of ) /s/ Tom Rowan
KAYNAR TECHNOLOGIES INC. by ). . . . . . . . . . . . . . . .
THOMAS JOSEPH ROWAN in the )
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
RECOIL PTY LIMITED ACN 006 664 ) /s/ Brian F. Ball
731 by BRIAN F. BALL in the )
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of ) /s/ Brian F. Ball
ADVENT LIMITED ACN 006 509 708 by ). . . . . . . . . . . . . . . .
BRIAN F. BALL in the )
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
<PAGE>
- 33 -
SIGNED for and on behalf of )
AUSTRALIAN PACIFIC TECHNOLOGY ) /s/ Brian F. Ball
LIMITED ACN 006 212 764 ). . . . . . . . . . . . . . . .
by BRIAN F. BALL in the )
presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of ) /s/ Brian F. Ball
WESTERN PACIFIC INVESTMENT ). . . . . . . . . . . . . . . .
COMPANY ACN 006 254 502 )
by BRIAN F. BALL )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED by MR. B. PRICE in the ) /s/ Bruce Price
presence of: ). . . . . . . . . . . . . . . .
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of B. )
PRICE HOLDINGS PTY LTD ACN 073 ) /s/ Bruce Price
779 352 by BRUCE PRICE )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
SIGNED for and on behalf of )
LENARDE PTY LTD ACN 005 846 597 ) /s/ Bruce Price
by BRUCE PRICE )
in the presence of: )
/s/ illegible
. . . . . . . . . . . . . . . . . . Witness
<PAGE>
================================================================================
AMENDED AND RESTATED
TERM LOAN AGREEMENT
dated as of August 12, 1996
between
KAYNAR HOLDINGS INC.,
as Borrower
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
================================================================================
-1-
<PAGE>
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . 2
1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . . 25
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . 25
1.04. References to this Agreement . . . . . . . . . . . . . . . . . . 25
1.05. Miscellaneous Terms. . . . . . . . . . . . . . . . . . . . . . . 25
1.06. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
AMOUNTS AND TERMS OF TERM LOANS
2.01. Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.02. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.03. Authorized Officers and Agents . . . . . . . . . . . . . . . . . 29
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.02. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.03. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.04. Promise to Repay; Evidence of Indebtedness . . . . . . . . . . . 33
ARTICLE IV
CONDITIONS TO SUPPLEMENTAL TERM LOAN
4.01. Conditions Precedent to the Supplemental Term Loan . . . . . . . 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties . . . . . . . . . . . . . . . . . 36
ARTICLE VI
REPORTING COVENANTS
6.01. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 40
6.02. Operations Reports . . . . . . . . . . . . . . . . . . . . . . . 43
6.03. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 44
6.04. Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.05. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.06. ERISA Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.07. Environmental Notices. . . . . . . . . . . . . . . . . . . . . . 47
-i-
<PAGE>
Section Page
- ------- ----
6.08. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.09. Government Contract Notices. . . . . . . . . . . . . . . . . . . 48
6.10. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01. Organizational Existence, Etc. . . . . . . . . . . . . . . . . . 49
7.02. Organizational Powers; Conduct of Business . . . . . . . . . . . 49
7.03. Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . 49
7.04. Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 50
7.05. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.06. Inspection of Property; Books and Records; Discussions . . . . . 51
7.07. Insurance and Condemnation Proceeds. . . . . . . . . . . . . . . 51
7.08. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . 52
7.09. Foreign Employee Benefit Plan Compliance . . . . . . . . . . . . 52
7.10. Government Contract Compliance . . . . . . . . . . . . . . . . . 52
7.11. Environmental Compliance . . . . . . . . . . . . . . . . . . . . 52
7.12. Maintenance of Property. . . . . . . . . . . . . . . . . . . . . 52
7.13. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII
NEGATIVE COVENANTS
8.01. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.02. Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 55
8.03. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
8.04. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
8.05. Accommodation Obligations. . . . . . . . . . . . . . . . . . . . 57
8.06. Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 57
8.07. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 58
8.08. Transactions with Shareholders and Affiliates. . . . . . . . . . 59
8.09. Restriction on Fundamental Changes . . . . . . . . . . . . . . . 59
8.10. Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . 59
8.11. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.12. Issuance of Capital Stock. . . . . . . . . . . . . . . . . . . . 61
8.13. Organizational Documents . . . . . . . . . . . . . . . . . . . . 61
8.14. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.15. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.16. Payment of PIK Dividend Notes. . . . . . . . . . . . . . . . . . 61
-ii-
<PAGE>
Section Page
- ------- ----
ARTICLE IX
FINANCIAL COVENANTS
9.01. Consolidated Cash Flow . . . . . . . . . . . . . . . . . . . . . 61
9.02. Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . 62
9.03. Consolidated Total Funded Indebtedness Coverage Ratio. . . . . . 62
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 63
10.02. Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE XI
MISCELLANEOUS
11.01. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
11.02. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.03. Change in Accounting Principles . . . . . . . . . . . . . . . . 68
11.04. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.05. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 69
11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.07. Survival of Warranties and Agreements . . . . . . . . . . . . . 70
11.08. Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . 70
11.09. Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . 70
11.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.13. Limitation of Liability . . . . . . . . . . . . . . . . . . . . 71
11.14. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 71
11.15. Certain Consents and Waivers of the Borrower. . . . . . . . . . 72
11.16. Counterparts; Effectiveness; Inconsistencies. . . . . . . . . . 73
11.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 73
11.18. No Novation . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.19. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 75
-iii-
<PAGE>
EXHIBITS
Exhibit A -- Form of Collection Account Agreement
Exhibit B -- Form of Notice of Borrowing
Exhibit C-1 -- Form of Pledge Agreement
Exhibit C-2 -- Form of Supplement to Pledge Agreement
Exhibit D-1 -- Form of Initial Term Note
Exhibit D-2 -- Form of Supplemental Term Note
Exhibit E -- Form of Officer's Certificate to Accompany
Reports
SCHEDULES
Schedule 1.01.1 -- Collection Accounts and
Collection Account Banks
Schedule 1.01.2 -- Permitted Existing Accommodation
Obligations
Schedule 1.01.3 -- Permitted Existing Indebtedness
Schedule 1.01.4 -- Permitted Existing Liens
Schedule 5.01-C -- Consents
Schedule 5.01-D -- Authorized, Issued and Outstanding Capital
Stock; Subsidiaries
-iv-
<PAGE>
AMENDED AND RESTATED
TERM LOAN AGREEMENT
This Amended and Restated Term Loan Agreement dated as of August 12,
1996 (as further amended, restated, supplemented or modified from time to time,
the "Agreement") is entered into by and between Kaynar Holdings Inc., a Delaware
corporation (the "Borrower"), and General Electric Capital Corporation, a New
York corporation (the "Lender").
PRELIMINARY STATEMENTS
WHEREAS, the Borrower and the Lender entered into the Term Loan
Agreement dated as of January 3, 1994 (the "Original Credit Agreement");
WHEREAS, the Original Credit Agreement has been amended by the First
Amendment dated as of December 15, 1994 (the "First Amendment"), the Second
Amendment dated as of May 30, 1995, and the Third Amendment dated as of August
4, 1995 (the "Third Amendment" and, collectively, the "Original Amendments"; and
the Original Credit Agreement, as amended by the Original Amendments, the
"Existing Credit Agreement"); and
WHEREAS, the Borrower and the Lender desire to amend and restate the
Existing Credit Agreement in its entirety to give effect to the terms and
provisions set forth in this Agreement, it being understood and agreed that (i)
with respect to any date or time period occurring and ending prior to the
Amendment and Restatement Effective Date (as defined below), the rights and
obligations of the parties thereto shall be governed by the provisions of the
Existing Credit Agreement (including, without limitation, the Exhibits and
Schedules thereto) which for such purposes shall remain in full force and
effect, (ii) with respect to any date or time period occurring or ending on or
after the Amendment and Restatement Effective Date, the rights and obligations
of the parties hereto shall be governed by this Agreement (including, without
limitation, the Exhibits and Schedules hereto) and (iii) it is the intent of the
Borrower and Lender that Lender shall remain a beneficiary under each Loan
Document executed on or before the date hereof pursuant to which the Borrower
granted a Lien to Lender in any of Borrower's Property and that all of the
Obligations shall be secured by the Liens on the Property subject to such Loan
Documents, as well as the Liens granted to Lender on all other Collateral on and
after the date hereof.
NOW, THEREFORE, in consideration of the premises, agreements,
covenants, representations and warranties herein contained, and for good and
valuable consideration, the receipt of which is hereby acknowledged, the
Borrower and the Lender agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.01. CERTAIN DEFINED TERMS. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"ACCOMMODATION OBLIGATION" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof by
the Person incurring the Accommodation Obligation is to provide assurance to the
obligee of such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of business), notes co-
made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
discharge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received. The amount of any Accommodation Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported; PROVIDED, that
(i) if the liability of the Person extending such guaranty or support is limited
with respect thereto to an amount less than the obligation guaranteed or
supported, or is limited to recourse against a particular asset or assets of
such Person, the amount of the corresponding Accommodation Obligation shall be
limited (in the case of a guaranty or other support limited by amount) to such
lesser amount or (in the case of a guaranty or other support limited by recourse
to a particular asset or assets) to the higher of the Fair Market Value of such
asset or assets at the date for determination of the amount of the Accommodation
Obligation or the value at which such asset or assets would, in conformity with
GAAP, be reflected on or valued for the purposes of preparing a consolidated
balance sheet of such Person as at such determination date; and (ii) if any
obligation is guaranteed or otherwise supported jointly and severally by a
Person and others, then the amount of the liability of such Person with respect
to such guaranty or other support to be included in the amount of such Person's
Accommodation Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"ACCOUNTS" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) accounts, (ii) contract rights, chattel paper,
instruments, documents, deposit accounts (including, without limitation, the
Collection Accounts of the Borrower, the "Collection Accounts" under (and as
defined in) the Opco Credit Agreement and the "Collection Accounts" under
-2-
<PAGE>
(and as defined in) the RCL Loan Agreement), and other rights to payment of
any kind, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and whether or not earned by
performance, (iii) any of the foregoing which are not evidenced by
instruments or chattel paper, (iv) intercompany receivables, and any security
documents executed in connection therewith, (v) proceeds of any letters of
credit or insurance policies on which the Borrower or any of its Subsidiaries
is named as beneficiary, (vi) claims against third parties for advances and
other financial accommodations and any other obligations whatsoever owing to
the Borrower or any of its Subsidiaries, (vii) rights in and to all security
agreements, leases, guarantees, instruments, securities, documents of title
and other contracts securing, evidencing, supporting or otherwise relating to
any of the foregoing, together with all rights in any goods, merchandise or
Inventory which any of the foregoing may represent, and (viii) rights in
returned and repossessed goods, merchandise and Inventory which any of the
same may represent, including, without limitation, any right of stoppage in
transit.
"AFFILIATE" means any Person (other than Lender) which directly or
indirectly owns or controls, on an aggregate basis, including all beneficial
ownership and ownership or control as a trustee, guardian or other fiduciary, at
least ten percent (10%) of the outstanding capital stock (or other ownership
interests) having ordinary voting power to elect a majority of the board of
directors or otherwise to direct or cause the direction of the management and
policies (irrespective of whether, at the time, stock (or other ownership
interest) of any other class or classes of such Person shall have or might have
voting power by reason of the happening of any contingency) of the Borrower or
any Subsidiary of the Borrower which is controlled by or is under common control
with the Borrower or any stockholders (or other owners) of the Borrower, or any
Subsidiary. For the purpose of this definition, "control" means the possession,
directly or indirectly, of the power to direct or to cause the direction of
management and policies, whether through the ownership of voting securities, by
contract or otherwise.
"AFS" means the Aerospace Fastening Systems Group of Microdot.
"AFS PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as
of November 3, 1993 by and between Opco and Microdot, pursuant to which Microdot
agrees to sell, and Opco agrees to purchase substantially all of the assets of
AFS.
"AGREEMENT" is defined in the preamble hereto.
"AMENDMENT AND RESTATEMENT EFFECTIVE DATE" is defined in SECTION
11.16.
-3-
<PAGE>
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Sections 101 ET SEQ.), as amended from time to time, and any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Central District of California, Santa Ana Division.
"BENEFIT PLAN" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) subject to Title IV of ERISA
(i) in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign Employee
Benefit Plan.
"BORROWER" is defined in the preamble hereto.
"BORROWING" means a borrowing of any Term Loan hereunder.
"BUSINESS ACTIVITY REPORT" means (i) a Notice of Business Activities
Report from the State of New Jersey Division of Taxation, or (ii) a Minnesota
Business Activity Report from the Minnesota Department of Revenue.
"BUSINESS DAY" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close in Los Angeles,
California, Chicago, Illinois or New York, New York.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity with
GAAP, are required to be included in or reflected by the Borrower's or any of
its Subsidiaries' fixed asset accounts as reflected in any of their respective
balance sheets; PROVIDED, HOWEVER, that Capital Expenditures shall include,
whether or not such a designation would be in conformity with GAAP, (i) that
portion of Capital Leases which is capitalized on the consolidated balance sheet
of the Borrower and its Subsidiaries and (ii) expenditures for Equipment which
is purchased simultaneously with the trade-in of existing Equipment owned by the
Borrower or any of its Subsidiaries, to the extent the gross purchase price of
the purchased Equipment exceeds the book value of the Equipment being traded in
at such time.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
-4-
<PAGE>
"CAPITAL STOCK", with respect to any Person, means any shares, capital
stock, stock units or units in the capital of such Person, regardless of class
or designation, and all warrants, options, purchase rights, conversion or
exchange rights, voting rights, calls or claims of any character with respect
thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; and (ii) domestic and
eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations), which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or Prime-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED, that the maturities of such Cash Equivalents
shall not exceed one year.
"CASH FLOW" means, for any Person for any period, the amounts for such
period (taken as a single accounting period determined in conformity with GAAP)
of such Person's (i) net income or loss determined on a first-in-first-out
method of inventory accounting basis, PLUS (ii) depreciation and amortization
expense, PLUS (iii) interest expense, PLUS (iv) foreign, federal and state
income taxes, PLUS (v) state sales taxes arising in connection with the
Purchase, to the extent included in the calculation of net income (or loss),
PLUS (vi) extraordinary losses, PLUS (vii) Liabilities and Costs incurred in
connection with any Remedial Action, to the extent included in the calculation
of net income (or loss), PLUS (viii) Transaction Costs, MINUS (ix) extraordinary
gains.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ., any amendments
thereto, any successor statutes, and any regulations or guidance promulgated
thereunder.
"CLAIM" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"COLLATERAL" means all Property and interests in Property now owned or
hereafter acquired by the Borrower upon which a Lien is granted under any of the
Loan Documents.
"COLLECTION ACCOUNT" means each deposit account of the Borrower
identified on SCHEDULE 1.01.1.
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"COLLECTION ACCOUNT AGREEMENT" means, with respect to each Collection
Account of the Borrower, an agreement in substantially the form of EXHIBIT A
attached hereto and made a part hereof (or such other form as may be agreed to
by the Borrower and the Lender), pursuant to which, among other things (i) the
Collection Account Bank party thereto agrees to remit to the Lender or its
designee in accordance with instructions contained therein, on a daily basis and
by wire transfer or through an automated clearing house, all collected funds on
deposit in the Collection Account(s) maintained by such Collection Account Bank
(which agreement may not be revoked, and shall remain in effect, until sixty
(60) days after such Collection Account Bank mails to the Lender and the
Borrower a notice of termination), and (ii) the Borrower (or its applicable
Subsidiary) and the Collection Account Bank confirm the Lender's perfected first
priority liens in the Collection Accounts subject thereto.
"COLLECTION ACCOUNT BANK" means each bank, trust company or other
financial institution identified on SCHEDULE 1.01.1 at which the Borrower or any
of its Subsidiaries maintains one or more Collection Accounts.
"COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Borrower.
"COMPLIANCE CERTIFICATE" is defined in SECTION 6.01(d).
"CONSOLIDATED CASH FLOW" means, for any period, the Cash Flow for such
period (taken as a single accounting period determined in conformity with GAAP)
of Opco and its Subsidiaries determined on a consolidated basis.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the amount for
such period (taken as a single accounting period determined in conformity with
GAAP) of total interest expense, paid in cash (including the interest component
of Capital Leases), of Opco and its Subsidiaries on a consolidated basis.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, for any period, the
ratio of (i) Consolidated Cash Flow for such period to (ii) Consolidated
Interest Charges for such period.
"CONSOLIDATED TOTAL FUNDED INDEBTEDNESS" means, as of any date of
determination, the amount (determined in conformity with GAAP) of (i) "Letter of
Credit Obligations" and Indebtedness evidenced by the "Notes" in each case under
(and as defined in) the Opco Credit Agreement, PLUS (ii) all other outstanding
Indebtedness of Opco and its Subsidiaries, determined on a consolidated basis,
which matures more than one year from the date such Indebtedness was incurred,
created or assumed by any of
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such Persons, or matures within one year from such date but is renewable or
extendible, at the option of the debtor, to a date more than one year from such
date, PLUS (iii) all other outstanding Indebtedness of Opco and its Subsidiaries
which arises under a revolving credit or similar agreement which obligates the
lender or lenders to extend credit during a period of more than one year from
such date, MINUS (iv) any Indebtedness owing by Opco or any of its Subsidiaries
to any other of such Persons.
"CONSOLIDATED TOTAL FUNDED INDEBTEDNESS COVERAGE RATIO" means, as of
any date of determination, the ratio of (i) Consolidated Total Funded
Indebtedness as such date to (ii) Consolidated Cash Flow for any period ending
on such date.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, extremely hazardous waste, special waste, petroleum
or petroleum-derived substance or waste, asbestos, PCBs, or any constituent of
any such substance or waste, and includes, but is not limited to, these terms as
defined in any Environmental Law, as well as any other substance which is
required by any Governmental Authority to be investigated, cleaned up, removed,
treated or otherwise abated or which is regulated by such Governmental
Authority.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"CUSTOMARY PERMITTED LIENS" means
(i) Liens (other than Environmental Liens and Liens in favor of
the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP;
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(iii) Liens (other than Environmental Liens and Liens in favor
of the PBGC) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety and performance bonds; PROVIDED,
that (A) all such Liens do not in the aggregate materially detract
from the value of the Borrower's or any of its Subsidiaries'
respective assets or Property or materially impair the use thereof in
the operation of their respective businesses, and (B) all such Liens
in connection with worker's compensation, unemployment insurance or
other types of social security benefits deposits shall secure
obligations in an aggregate principal amount not exceeding $50,000 at
any time outstanding; and
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or
encumbrances on the use of Real Property which do not interfere with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries.
"DESIGNATED PREPAYMENT" is defined in SECTION 3.01(b)(iii).
"DOD" means the United States Department of Defense, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOL" means the United States Department of Labor, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOLLARS" and "$" mean the lawful money of the United States.
"ENVIRONMENTAL LAW" means any Requirement of Law derived from or
relating to federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA, and any state or local equivalent thereof.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental Law, or (ii) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirement of Law that conditions, restricts,
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prohibits or requires any notification or disclosure triggered by the transfer,
sale, lease or closure of any Property or deed or title for any Property for
environmental reasons, including, but not limited to, any so-called
"Environmental Cleanup Responsibility Acts" or "Responsible Transfer Acts".
"EQUIPMENT" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) equipment, including, without limitation,
machinery, manufacturing, distribution, selling, data processing and office
equipment, assembly systems, tools, molds, dies, fixtures, appliances,
furniture, furnishings, vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal Property (other than the Borrower's and
each such Subsidiary's respective Inventory), and (iii) any and all accessions,
parts and appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, any successor statutes, and any regulations or guidance
promulgated thereunder.
"ERISA AFFILIATE" means (i) any Person which is a member of the same
controlled group of Persons (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Borrower; (ii) a partnership or other trade or
business (whether or not incorporated) which is under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with the Borrower; and
(iii) a member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Borrower, any Person
described in CLAUSE (i) above or any partnership or trade or business described
in CLAUSE (ii) above.
"EVENT OF DEFAULT" means any of the occurrences set forth in SECTION
10.01 after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in SECTION 10.01.
"EXCESS CASH FLOW" means, for any Fiscal Year, an amount equal to
(i) Cash Flow for such Fiscal Year, MINUS (ii) income taxes paid in cash during
such Fiscal Year, MINUS (iii) state sales taxes arising in connection with the
Purchase which are paid in cash during such Fiscal Year, MINUS (iv) Capital
Expenditures paid in cash during such Fiscal Year, MINUS (v) Transaction Costs
paid in cash during such Fiscal Year, MINUS (vi) interest on permitted
Indebtedness of the Borrower and its Subsidiaries paid in cash during such
Fiscal Year, including, without limitation, the interest component of all
Capital Leases, MINUS (vii) for Fiscal Year 1994, $2,000,000, MINUS (viii) for
Fiscal Year 1995 and each Fiscal Year thereafter, scheduled amortization of the
principal portion of the "Term Loan" under (and as defined in) the Opco Credit
Agreement during such Fiscal
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Year, MINUS (ix) extraordinary cash losses incurred during such Fiscal Year,
MINUS (x) Liabilities and Costs paid in cash during such Fiscal Year and
incurred in connection with any Remedial Action, PLUS (xi) extraordinary cash
gains for such Fiscal Year, PLUS (xii) any cash gain for such Fiscal Year with
respect to any inventory or accounts purchased from MAL in connection with the
Purchase, to the extent included in the calculation of net income (or loss),
PLUS (or MINUS) (xiii) any decrease (or increase) in Net Working Capital since
the last day of the then immediately preceding Fiscal Year, the amount for such
Fiscal Year in each case determined in conformity with GAAP for the Borrower,
Opco and their respective Subsidiaries on a consolidated basis.
"EXCESS PROCEEDS OF ISSUANCE OF STOCK OR INDEBTEDNESS" means net cash
proceeds received by the Borrower or any of its Subsidiaries at any time after
the Amendment and Restatement Effective Date on account of the issuance of (i)
Capital Stock of the Borrower or any of its Subsidiaries (other than Capital
Stock of a Subsidiary issued to the Borrower or to a Subsidiary of the Borrower)
or (ii) Indebtedness (other than Indebtedness permitted under SECTION 8.01) of
the Borrower or any of its Subsidiaries, in each case net of all transaction
costs and underwriters' discounts with respect thereto.
"EXISTING CREDIT AGREEMENT" is defined in the preliminary statements
hereto.
"EXPORT LICENSE" means any and all licenses, authorizations, approvals
or applications therefor relating to exports, reexports, temporary exports,
temporary imports and imports, as the case may be, granted by or pending before
the United States Department of Commerce, the United States Department of State
or any other United States Governmental Authority.
"FACILITY SECURITY CLEARANCE" means an administrative determination by
the applicable United States Government Authority that, from a security
viewpoint, a facility is eligible for access to classified information of a
certain category and all lower categories.
"FAIR MARKET VALUE" means, with respect to any asset, the value of the
consideration obtainable in a sale of such asset in the open market, assuming a
sale by a willing seller to a willing purchaser dealing at arm's length and
arranged in an orderly manner over a reasonable period of time, each having
reasonable knowledge of the nature and characteristics of such asset, neither
being under any compulsion to act, determined (a) in good faith by the board of
directors of the Borrower or (b) in an appraisal of such asset, PROVIDED, that
such appraisal was performed relatively contemporaneously with such sale by an
independent third party appraiser and the basic assumptions underlying such
appraisal have not materially changed since the date thereof.
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"FISCAL YEAR" means the fiscal year of the Borrower, which shall be
the 12-month period ending on December 31 of each calendar year.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the Borrower, any of its Subsidiaries or any of its
ERISA Affiliates and is not covered by ERISA pursuant to ERISA Section 4(b)(4).
"FOREIGN PENSION PLAN" means any employee benefit plan as defined in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of the Borrower, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA,
and (iii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accounting Standards Board or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the date hereof (unless otherwise
specified herein as in effect on another date or dates).
"GENERAL INTANGIBLES" means all of the Borrower's and its
Subsidiaries' respective present and future (i) general intangibles, (ii)
rights, interests, choses in action, causes of action, claims and other
intangible Property of every kind and nature (other than Accounts), (iii)
corporate and other business records, (iv) loans, royalties, and other
obligations receivable, (v) trademarks, registered trademarks, trademark
applications, service marks, registered service marks, service mark
applications, patents, patent applications, trade names, rights of use of any
name, labels, fictitious names, inventions, designs, trade secrets, computer
programs, software, printouts and other computer materials, goodwill,
registrations, copyrights, copyright applications, permits, licenses,
franchises, customer lists, credit files, correspondence, and advertising
materials, (vi) customer and supplier contracts, firm sale orders, rights under
license and franchise agreements, rights under tax sharing agreements, and other
contracts and contract rights, (vii) interests in partnerships and joint
ventures, (viii) tax refunds and tax refund claims, (ix) right, title and
interest under leases, subleases, licenses and concessions and other agreements
relating to Property, (x) deposit accounts (general or special) with any bank or
other financial institution (including, without limitation, the Collection
Accounts of the Borrower, the "Collection Accounts" under (and as defined in)
the Opco Credit Agreement and the "Collection Accounts" under (and as defined
in) the RCL Loan Agreement), (xi) credits with and other claims against third
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parties (including carriers and shippers), (xii) rights to indemnification and
with respect to support and keep-well agreements, (xiii) reversionary interests
in pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, (xiv) proceeds of insurance of which the Borrower or such
Subsidiary is beneficiary, (xv) letters of credit, guarantees, Liens, security
interests and other security held by or granted to the Borrower or such
Subsidiary, (xvi) uncertificated securities, and (xvii) governmental
certificates and certifications, including, without limitation, certificates and
certifications relating to Government Contracts and Export Licenses,
authorizations and approvals, issued to the Borrower or such Subsidiary.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, provincial, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENT CONTRACT" means any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase order of
the Borrower or any of its Subsidiaries which is entered into with or submitted
to any United States Governmental Authority or any agency, agent or
instrumentality thereof, including, among other things, all contracts and work
authorizations to supply goods and services to the United States Government.
"INDEBTEDNESS", as applied to any Person, means, at any time, (i) all
indebtedness, obligations or other liabilities of such Person (A) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instruments, and any accrued interest, fees and charges relating
thereto, (B) under profit payment agreements or in respect of obligations to
redeem, repurchase or exchange any Securities of such Person or to pay dividends
in respect of any stock, (C) with respect to letters of credit issued for such
Person's account, (D) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the ordinary
course of business, (E) in respect of Capital Leases, (F) which are
Accommodation Obligations or (G) under warranties and indemnities; (ii) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any property of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by such Person, all as of such time;
(iii) all preferred stock subject (upon the occurrence of any contingency or
otherwise) to mandatory redemption; and (iv) all contingent Contractual
Obligations with respect to any of the foregoing.
"INDEX RATE" means the higher of:
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(i) the highest prime or base rate of interest published in New York
City by any of Morgan Guaranty Trust Company of New York, Citibank, N.A.
and Chemical Bank (whether or not such rate is actually charged by any such
bank); and
(ii) the latest published rate for 90-day directly placed commercial
paper (or the mid-point in the range of such rates, if more than one rate
is published) as quoted either in the Federal Reserve Rate Report which
customarily appears in the Friday issue of THE WALL STREET JOURNAL under
"Money Rates" or in such other publication as the Lender may, from time to
time hereafter, designate in writing.
"INITIAL CLOSING DATE" means the date the Initial Term Loan was made.
"INITIAL TERM LOAN" is defined in SECTION 2.01(a).
"INITIAL TERM NOTE" is defined in SECTION 2.01(d).
"INTEREST PAYMENT DATE" means each March 31, June 30, September 30 and
December 31 during the term of this Agreement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"INVENTORY" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) inventory, (ii) goods, merchandise and other
personal Property furnished or to be furnished under any contract of service or
intended for sale or lease, and all consigned goods and all other items which
have previously constituted Equipment but are then currently being held for sale
or lease in the ordinary course of the Borrower's or such Subsidiary's business,
(iii) raw materials, work-in-process and finished goods, (iv) materials and
supplies of any kind, nature or description used or consumed in the Borrower's
or such Subsidiary's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the Property
described in CLAUSES (i) through (iii) above, (v) goods in which the Borrower or
such Subsidiary has a joint or other interest or right of any kind (including,
without limitation, goods in which the Borrower or such Subsidiary has an
interest or right as consignee), and (vi) goods which are returned to or
repossessed by the Borrower or such Subsidiary; in each case whether in the
possession of the Borrower, such Subsidiary, a bailee, a consignee, or any other
Person for sale, storage, transit, processing, use or otherwise, and any and all
documents for or relating to any of the foregoing.
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"INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business. The amount of
any Investment shall be the original cost of such Investment, plus the cost of
all additions thereto less the amount of any return of capital or principal to
the extent such return is in cash with respect to such Investment without any
adjustments for increases or decreases in value or write-ups, write-downs or
write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"KAYNAR FEMIPARI" means K.T.I. Femipari KFT, a company organized under
the laws of Hungary.
"KAYNAR U.K." means Kaynar Technologies Ltd., a company organized
under the laws of England and Wales.
"LENDER" is defined in the preamble hereto.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or Remedial
Action studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a Capital Lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor pursuant to Section 9-408 of
the Uniform Commercial Code), naming the owner of such
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property as debtor, under the Uniform Commercial Code or other comparable law
of any jurisdiction.
"LOAN ACCOUNT" is defined in SECTION 3.04(b).
"LOAN DOCUMENTS" means this Agreement (and for the applicable period,
the Existing Credit Agreement), the Term Notes, the Pledge Agreement and all
other instruments, agreements and written Contractual Obligations between the
Borrower and the Lender delivered to the Lender pursuant to or in connection
with the transactions contemplated hereby or by the Existing Credit Agreement.
"MAL" means Microdot Aerospace Limited, a company organized under the
laws of the United Kingdom, and a wholly-owned Subsidiary of Microdot.
"MAL PURCHASE AGREEMENT" means, to the extent the assets of MAL have
been made available in accordance with the AFS Purchase Agreement, the agreement
by and between MAL, Opco and Kaynar U.K., pursuant to which Opco and Kaynar U.K.
agree to purchase substantially all of the assets of MAL, which agreement shall
be in form and substance satisfactory to the Lender.
"MANAGEMENT DISCUSSION AND ANALYSIS" is defined in SECTION 6.02.
"MANAGEMENT INVESTORS" means Jordan A. Law, David A. Werner, Leroy A.
Dack, Robert L. Beers, Imre Berecz, Joseph Varholick and Joseph F. Blomberg.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i) the
financial condition, operations, assets or prospects of the Borrower, Opco or
any of their respective Subsidiaries, (ii) the ability of the Borrower, Opco or
any of their respective Subsidiaries to perform their respective obligations
under the Transaction Documents, or (iii) the ability of the Lender to enforce
the Loan Documents.
"MICRODOT" means Microdot Inc., a Delaware corporation.
"MICRODOT LOAN AGREEMENT" means that certain Loan and Security
Agreement dated as of December 30, 1983 between Lender and Microdot, as amended,
as amended and restated by that certain Amended and Restated Loan and Security
Agreement dated as of April 1, 1989 between Lender and Microdot, as further
amended by Amendment No. 1 thereto dated as of December 8, 1992.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Borrower or any ERISA Affiliate.
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"NET CASH PROCEEDS OF SALE" means (i) proceeds received by the
Borrower or any of its Subsidiaries in cash from the sale, assignment or other
disposition of (but not the lease or license of) any Property, other than sales
permitted under CLAUSES (ii) through (iv) of SECTION 8.02, net of (A) the costs
of sale, assignment or other disposition, (B) any income, franchise, transfer or
other tax liability arising from such transaction and (C) amounts required to be
applied to the repayment of Indebtedness secured by a Lien permitted by
SECTION 8.03 on the asset disposed of, if such net proceeds arise from any
individual sale, assignment or other disposition or from any group of related
sales, assignments or other dispositions; and (ii) proceeds of insurance on
account of the loss of, damage to or the occurrence of any other insured risk
with respect to, any such Property or Properties, and payments of compensation
for any such Property or Properties taken by condemnation or eminent domain, as
provided in SECTION 7.07.
"NET WORKING CAPITAL" means, as of any date of determination, the
excess, if any, of (i) consolidated current assets, except cash and Cash
Equivalents, over (ii) consolidated current liabilities, except current
maturities of long-term debt as of such date, in each case for the Borrower and
its Subsidiaries on a consolidated basis.
"NOTICE OF BORROWING" means a notice substantially in the form of
EXHIBIT B attached hereto and made a part hereof.
"OBLIGATIONS" means the Term Loans and all advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, or any Person entitled to indemnification pursuant to SECTION 11.02 of
this Agreement, of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, arising under this
Agreement, any Term Note or any other Loan Document, whether or not for the
payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest (including, without limitation,
interest, whether or not allowed under Section 502 of the Bankruptcy Code or
otherwise, at the then applicable rate (including the rate in effect from time
to time under SECTION 2.02(c)) specified herein that accrues after the
commencement of any proceeding under the Bankruptcy Code or other applicable
bankruptcy, reorganization, insolvency, dissolution, liquidation or other debtor
relief Requirement of Law), charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Borrower under this Agreement
or any other Loan Document.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a
corporation by (i) the chairman or vice-chairman of
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its board of directors (if an officer of such corporation) or (ii) its
president, any of its vice-presidents, its chief financial officer, or its
treasurer.
"OPCO" means Kaynar Technologies Inc., a Delaware corporation.
"OPCO CREDIT AGREEMENT" means that certain Credit Agreement dated as
of January 3, 1994 by and between Opco and the Lender, as amended and as amended
and restated by that certain Amended and Restated Credit Agreement of even date
herewith by and between Opco and the Lender, as the same may be further amended,
restated, supplemented or modified from time to time.
"OPCO LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Opco Credit Agreement.
"OPERATING LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any corporation,
limited liability company, unlimited liability company or partnership (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation or limited liability company, (ii) the
partnership agreement executed by the partners in the partnership, (iii) the
certificate of registration and memorandum and articles of association of such
unlimited liability company, (iv) the by-laws (or the equivalent governing
documents) of the corporation, limited liability company, unlimited liability
company or partnership, and (iv) any document setting forth the designation,
amount and/or relative rights, limitations and preferences of any class or
series of such corporation's Capital Stock or such limited liability company's,
unlimited liability company's or partnership's equity or ownership interests.
"ORIGINAL AMENDMENTS" is defined in the preliminary statements hereto.
"ORIGINAL CREDIT AGREEMENT" is defined in the preliminary statements
hereto.
"OSHA" means the Occupational Safety and Health Act of 1970, any
amendments thereto, any successor statutes and any regulations or guidance
promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PCBS" means polychlorinated biphenyls.
"PERMITS" means any license, permit, variance, interim permit, permit
application, approval, consent, certification,
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qualification or other authorization under any Requirement of Law applicable
to the Borrower or any of its Subsidiaries or otherwise required by any
Governmental Authority in connection with the business or operations of the
Borrower or any of its Subsidiaries, including, without limitation, any
license, permit, consent, certification, approval, authorization or
qualification relating to any Government Contract.
"PERMITTED EXISTING ACCOMMODATION OBLIGATIONS" means the Accommodation
Obligations of the Borrower and its Subsidiaries identified as such on SCHEDULE
1.01.2.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.3.
"PERMITTED EXISTING LIENS" means the Liens on the Property of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.4.
"PERSON" means any natural person, corporation, limited liability
company, unlimited liability company, limited partnership, general partnership,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any Governmental Authority.
"PERSONNEL SECURITY CLEARANCE" means an administrative determination
by the applicable United States Governmental Authority that an individual is
eligible, from a security point of view, for access to classified information of
the same or lower category as the level of the personnel clearance being
granted.
"PIK DIVIDEND NOTE AGREEMENT" means that certain PIK Dividend Note
Agreement dated as of January 3, 1994 by and between the Borrower and the
Lender, as the initial holder of the Preferred Stock of the Borrower, and the
other Persons from time to time party thereto as "Holders" (as defined therein),
as the same may be amended, restated, supplemented or modified from time to
time.
"PIK DIVIDEND NOTES" means the outstanding promissory notes issued by
the Borrower pursuant to the PIK Dividend Note Agreement.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(i) in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign
Employee Benefit Plan.
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"PLEDGE AGREEMENT" means that certain pledge agreement dated as of
January 3, 1994, in the form of EXHIBIT C-1 attached hereto and made a part
hereof, executed by the Borrower in favor of the Lender, pursuant to which the
Borrower pledges and grants a security interest to the Lender in all of the
issued and outstanding Capital Stock of Opco and related Property, as
supplemented by the Supplement to Pledge Agreement, and as the same may be
further amended, supplemented or modified from time to time.
"POTENTIAL EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"PREFERRED STOCK" means the Series A Preferred Stock and the Series B
Preferred Stock.
"PROCESS AGENT" is defined in SECTION 11.15.
"PROPERTY" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, Equipment,
Inventory, General Intangible, Account, or other asset owned, leased or operated
by the Borrower or its Subsidiaries, as applicable, (including any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
"PURCHASE" means, collectively, (i) the purchase by Opco from Microdot
of substantially all of the assets of AFS pursuant to the AFS Purchase Agreement
and (ii) to the extent the assets of MAL have been made available in accordance
with the AFS Purchase Agreement, the purchase by Opco and the U.K. Subsidiary of
substantially all of the assets of MAL pursuant to the MAL Purchase Agreement.
"PURCHASE AGREEMENTS" means the AFS Purchase Agreement and, to the
extent the assets of MAL have been made available in accordance with the AFS
Purchase Agreement, the MAL Purchase Agreement, and "PURCHASE AGREEMENT" means
either of them.
"PURCHASE DOCUMENTS" means the Purchase Agreements and all of the
agreements, documents and instruments executed in connection with either of
them.
"RCL" means RCL Pty, an unlimited liability company organized under
the laws of the State of Victoria, Australia.
"RCL LOAN AGREEMENT" means that certain Term Loan Agreement of even
date herewith by and between RCL and the Lender, as the same may be amended,
restated, supplemented or modified from time to time.
"RCL LOAN DOCUMENTS" means the RCL Loan Agreement and the agreements,
documents and instruments executed in connection therewith.
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"RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Sections 6901 ET SEQ., any amendments thereto, any successor statutes,
and any regulations or guidance promulgated thereunder.
"REAL PROPERTY" means all of the Borrower's and each of its
Subsidiaries' respective present and future right, title and interest
(including, without limitation, any leasehold estate) in (i) any plots, pieces
or parcels of land, (ii) any improvements, buildings, structures and fixtures
now or hereafter located or erected thereon or attached thereto of every nature
whatsoever (the rights and interests described in CLAUSE (i) or (ii) above being
the "Premises"), (iii) all easements, rights of way, gores of land or any lands
occupied by streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and (v) all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the rights
and interests described in CLAUSE (iii) or (iv) above.
"RECOIL ACQUISITION" means, collectively, (i) the purchase by Opco of
substantially all of the assets of Recoil U.S. pursuant to the Recoil U.S.
Acquisition Agreement and (ii) the purchase by Opco, RCL and, if designated by
Opco to acquire the shares of Recoil U.K., Kaynar U.K. of substantially all of
the assets of Recoil Australia pursuant to the Recoil Australia Acquisition
Agreement and related documents.
"RECOIL ACQUISITION AGREEMENTS" means the Recoil U.S. Acquisition
Agreement and the Recoil Australia Acquisition Agreement, and "RECOIL
ACQUISITION AGREEMENT" means either of them.
"RECOIL ACQUISITION DOCUMENTS" means the Recoil Acquisition Agreements
and all of the agreements, documents and instruments executed in connection with
either of them.
"RECOIL AUSTRALIA" means Recoil Pty Ltd, a company organized under the
laws of the State of Victoria, Australia.
"RECOIL AUSTRALIA ACQUISITION AGREEMENT" means that certain Australian
Asset Sale Agreement dated August 9, 1996 among Opco, RCL, Recoil Australia and
the other Vendors, pursuant to which the Vendors agree to sell, and Opco and RCL
agree to purchase, substantially all of the assets of Recoil Australia.
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"RECOIL AUSTRALIA HOLDINGS" means Recoil Australia Holdings, Inc., a
Delaware corporation.
"RECOIL BELGIUM" means Recoil Marketing BVBA, a company organized
under the laws of Belgium.
"RECOIL HOLDINGS" means Recoil Holdings, Inc., a Delaware corporation.
"RECOIL U.K." means Recoil (Europe) Limited, a company organized under
the laws of England and Wales.
"RECOIL U.S." means Recoil Inc., an Oregon corporation.
"RECOIL U.S. ACQUISITION AGREEMENT" means that certain US Asset Sale
Agreement dated August 9, 1996 among Opco, Recoil U.S., Recoil Australia and the
other Vendors, pursuant to which Recoil U.S. agrees to sell, and Opco agrees to
purchase, substantially all of the assets of Recoil U.S.
"RELEASE" means release, presence, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any Property or Third Party
Property, including the movement of Contaminants through or in the air, soil,
surface water, groundwater, Property or Third Party Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REPORTABLE EVENT" means any of the events described in Section 4043
of ERISA and the regulations promulgated thereunder as in effect from time to
time, excluding any event with respect to which the 30-day notice requirement is
waived in the applicable regulations.
"REQUIREMENTS OF LAW" means, as to any Person, the Organizational
Documents of such Person, and any law, rule or regulation, or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject including, without limitation, the
Securities Act, the Securities Exchange Act, ERISA, the Fair Labor Standards Act
and any certificate of occupancy, zoning ordinance, building, environmental or
land use requirement or Permit or environmental, labor, employment, occupational
safety or health law, ordinance, rule, regulation or common law.
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"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries now or hereafter outstanding,
and (iii) any payment made to redeem, purchase, repurchase or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of the Borrower or any of its
Subsidiaries now or hereafter outstanding.
"SCHEDULED MATURITY DATE" means the fifth (5th) anniversary of the
Initial Closing Date.
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates of
interest, shares, or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire
any of the foregoing, but shall not include any evidence of the Obligations.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
"SERIES A PREFERRED STOCK" means the Series A Convertible Preferred
Stock, par value $0.01 per share, of the Borrower.
"SERIES B PREFERRED STOCK" means the Series B Preferred Stock, par
value $0.01 per share, of the Borrower.
"SHAREHOLDERS AGREEMENT" means that certain Shareholders Agreement
dated as of January 3, 1994 among the Borrower, the Lender and the Management
Investors regarding transfers of, restrictions on and other rights and
conditions relating to the Common Stock and the Preferred Stock, as the same may
be amended, supplemented or modified from time to time.
"SOLVENT", when used with respect to any Person, means that at the
time of determination:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its
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debts (including, without limitation, contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
"SUBSIDIARY" of a Person means any corporation, limited liability
company, unlimited liability company, general or limited partnership, or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions with respect to such entity are at the time directly or
indirectly owned or controlled by such Person, one or more of the other
subsidiaries of such Person or any combination thereof.
"SUPPLEMENTAL TERM LOAN" is defined in SECTION 2.01(a).
"SUPPLEMENTAL TERM NOTE" is defined in SECTION 2.01(d).
"SUPPLEMENT TO PLEDGE AGREEMENT" is defined in SECTION 4.01(a)(iv).
"TAXES" is defined in SECTION 3.03(a).
"TERM LOAN COMMITMENTS" means the obligation of the Lender to make (a)
the Initial Term Loan pursuant to the terms and conditions of this Agreement
(and, for the applicable period, the Existing Credit Agreement), which shall be
in an aggregate principal amount equal to (i) $4,800,000, PLUS (ii) all
additions in principal due to the capitalization of interest under the Existing
Credit Agreement and this Agreement and (b) the Supplemental Term Loan pursuant
to the terms and conditions of this Agreement, which shall be in an aggregate
principal amount equal to $4,000,000, in each case as permanently reduced by
payments or prepayments on the Term Loans made from time to time pursuant to
SECTION 2.01(d) or SECTION 3.01.
"TERM LOANS" is defined in SECTION 2.01(a).
"TERM NOTES" is defined in SECTION 2.01(d).
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Borrower or such ERISA Affiliate
was a "substantial
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employer" as defined in Section 4001(a)(2) of ERISA or the cessation of
operations of a facility which results in the termination of employment of
20% of Benefit Plan participants who are employees of the Borrower or any
ERISA Affiliate; (iii) the imposition of an obligation on the Borrower or any
ERISA Affiliate under Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by
the PBGC or any similar foreign Governmental Authority of proceedings to
terminate a Benefit Plan or a Foreign Pension Plan; (v) any event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Benefit Plan; (vi) a foreign Governmental Authority shall
appoint or institute proceedings to appoint a trustee to administer any
Foreign Pension Plan; or (vii) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer Plan or a Foreign
Pension Plan.
"THIRD PARTY PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank or unit or equipment
owned, leased or operated by any Person other than the Borrower or its
Subsidiaries (including, without limitation, any surface water thereon or
adjacent thereto and soil and ground water thereunder).
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Borrower, Opco and their respective Subsidiaries in connection with the
execution, delivery and performance of the Transaction Documents.
"TRANSACTION DOCUMENTS" means (i) the Loan Documents, (ii) the PIK
Dividend Note Agreement and the PIK Dividend Notes, (iii) the Opco Loan
Documents, (iv) the Purchase Documents, (v) the RCL Loan Documents and (vi) the
Recoil Acquisition Documents.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as enacted
in the State of California, as it may be amended from time to time.
"VENDORS" means Recoil Australia, Advent Limited, Australian Pacific
Technology Limited, Western Pacific Investment Company Limited, Mr. Bruce Price,
B. Price Holdings Pty Ltd and Lenarde Pty Ltd.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the
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date numerically corresponding to the first day of such period, PROVIDED,
that if such period commences on the last day of a calendar month (or on a
day for which there is no numerically corresponding day in the calendar month
during which such period is to end), such period shall, unless otherwise
expressly required by the other provisions of this Agreement, end on the last
day of the calendar month.
1.03. ACCOUNTING TERMS. Subject to SECTION 11.03, for purposes of
this Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.04. REFERENCES TO THIS AGREEMENT. The words "hereof", "herein",
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, subsection, clause, schedule and exhibit references herein are
references to articles, sections, subsections, clauses, schedules and exhibits
to this Agreement unless otherwise specified.
1.05. MISCELLANEOUS TERMS. All terms defined in this Agreement in
the singular shall have comparable meanings when used in the plural, and VICE
VERSA, unless otherwise specified. The term "including" is by way of example
and not limitation. A reference to a statute, ordinance, code or other
Requirement of Law includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of any of them. A
reference to a Person includes a reference to the Person's executors,
administrators, successors, substitutes (including Persons taking by novation)
and assigns.
1.06. OTHER TERMS. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings assigned to
such terms by the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNTS AND TERMS OF TERM LOANS
2.01. TERM LOANS. (a) AMOUNTS OF TERM LOANS. The Lender has made a
term loan, in Dollars, to the Borrower on the Initial Closing Date in an initial
principal amount equal to $4,800,000. The outstanding principal amount of such
term loan has increased after the Initial Closing Date due to the Borrower's
election to capitalize accrued and unpaid interest on such term loan in
accordance with the terms of the Existing Credit Agreement and will continue to
increase after the Amendment and Restatement Effective Date if the Borrower
elects to capitalize accrued and unpaid interest on such term loan in accordance
with the terms of SECTION 2.02(b)(i) (the term loan in the principal amount made
on the Initial Closing Date, together
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with all additions to principal due to the capitalization of interest under
the Existing Credit Agreement and under this Agreement are collectively
referred to herein as the "Initial Term Loan"). Subject to the terms and
conditions set forth in this Agreement, the Lender hereby agrees to make a
second term loan, in Dollars, to the Borrower on the Amendment and
Restatement Effective Date in an aggregate amount equal to $4,000,000 (the
"Supplemental Term Loan", and together with the Initial Term Loan, the "Term
Loans").
(b) NOTICE OF BORROWING. When the Borrower desires to borrow the
Supplemental Term Loan under this SECTION 2.01, it shall deliver to the Lender a
Notice of Borrowing, signed by it, on the Amendment and Restatement Effective
Date. Such Notice of Borrowing shall specify (i) the amount of the proposed
Borrowing, and (ii) instructions for the disbursement of the proceeds of the
proposed Borrowing. In lieu of delivering such a Notice of Borrowing, the
Borrower may give the Lender telephonic notice of the Borrowing of the
Supplemental Term Loan on the Amendment and Restatement Effective Date, if it
confirms such notice by delivery of the Notice of Borrowing to the Lender
promptly, but in no event later than 5:00 p.m. (Chicago time) on the same day.
Any Notice of Borrowing (or telephonic notice in lieu thereof) given pursuant to
this SECTION 2.01(b) shall be irrevocable.
(c) MAKING OF SUPPLEMENTAL TERM LOAN. Promptly after receipt of a
Notice of Borrowing under SECTION 2.01(b) (or telephonic notice in lieu
thereof), the Lender shall deposit an amount equal to the amount requested by
the Borrower to be made in respect of the Supplemental Term Loan under this
SECTION 2.01(c), in immediately available funds, not later than 1:00 p.m.
(Chicago time) on the Amendment and Restatement Effective Date. Subject to the
fulfillment of the conditions precedent set forth in SECTION 4.01, the Lender
shall make the proceeds of such amounts available to the Borrower by disbursing
such proceeds on the Amendment and Restatement Effective Date to an account
specified in a written notice from the Lender to the Borrower or in accordance
with the Borrower's disbursement instructions set forth in such Notice of
Borrowing.
(d) TERM NOTES; REPAYMENT OF THE TERM LOANS. (i) On the Initial
Closing Date, the Borrower executed and delivered to the Lender a promissory
note evidencing the Initial Term Loan in the form of EXHIBIT D-1 attached hereto
and made a part hereof (the "Initial Term Note"). On the Amendment and
Restatement Effective Date, the Borrower shall execute and deliver to the
Lender, a separate promissory note, in substantially the form of EXHIBIT D-2
attached hereto and made a part hereof, evidencing the Supplemental Term Loan
(the "Supplemental Term Note" and, together with the Initial Term Note, the
"Term Notes"). The outstanding principal balance of the Term Loans (including,
without limitation, the principal balance of the Initial Term Loan attributable
to interest capitalized in accordance with the terms of SECTION 2.02(b)(i))
shall be payable in full on the
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earlier of (x) the Scheduled Maturity Date (or, if not a Business Day, the
immediately preceding Business Day), and (y) the date of acceleration of the
Obligations pursuant hereto.
(ii) In addition to the scheduled payment on the Term Loans, the
Borrower may make the voluntary prepayments described in SECTION 3.01(a) and
shall make the mandatory prepayments prescribed in SECTION 3.01(b), for credit
against such scheduled payments on the Term Loans pursuant to SECTION 3.01(a) or
SECTION 3.01(b), as applicable.
(e) USE OF PROCEEDS OF SUPPLEMENTAL TERM LOAN. The proceeds of the
Supplemental Term Loan shall be used by the Borrower to make a capital
contribution to Opco (and the Borrower shall cause Opco to use the proceeds of
such capital contribution for the purposes set forth in Section 2.01(e) of the
Opco Credit Agreement).
2.02. INTEREST. (a) RATE OF INTEREST. (i) The Initial Term Loan
and the outstanding principal balance of all other Obligations (other than the
outstanding principal balance of the Supplemental Term Loan) shall bear interest
on the unpaid principal amount thereof from the date the Initial Term Loan is
made (or the dates interest thereon has been or is capitalized) and such other
Obligations are due and payable until paid in full, except as otherwise provided
in SECTION 2.02(c), at a per annum rate equal to (i) for the period commencing
on the Initial Closing Date and ending on December 31, 1995, nine and one-half
percent (9.50%) and (ii) for the period commencing on January 1, 1996 and ending
on the date the Obligations are paid in full, eleven and one-half percent
(11.50%).
(ii) The Supplemental Term Loan shall bear interest on the unpaid
principal amount thereof from the date the Supplemental Term Loan is made until
paid in full, except as otherwise provided in SECTION 2.02(c), at a rate per
annum equal to the sum of (i) the Index Rate, as in effect from time to time as
interest accrues, PLUS (ii) one and one-half percent (1.50%).
(b) INTEREST PAYMENTS. (i) Interest accrued on the Initial Term
Loan shall be payable in arrears (A) with respect to interest accrued and unpaid
as of any Interest Payment Date, on the day immediately following such Interest
Payment Date, commencing on the first such day immediately following March 31,
1994, (B) upon the payment or prepayment of the Initial Term Loan in full, and
(C) if not theretofore paid in full, at maturity (whether by acceleration or
otherwise) of the Initial Term Loan. Accrued and unpaid interest on the
outstanding principal balance of the Initial Term Loan may, at the option of the
Borrower, be paid in immediately available funds in accordance with the
immediately preceding sentence and SECTION 3.02(a). If interest on the Initial
Term Loan is not so paid, such interest shall be capitalized on the day
immediately following the applicable Interest Payment Date, and the outstanding
principal balance of
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the Initial Term Loan shall automatically and without notice of any kind
whatsoever be increased by an amount equal to such interest.
(ii) Interest accrued on the Supplemental Term Loan shall be payable
in arrears (A) with respect to interest accrued and unpaid as of the end of any
calendar month, on the first day of the immediately succeeding calendar month,
commencing on the first such day following the making of the Supplemental Term
Loan, (B) upon the payment or prepayment of the Supplemental Term Loan in full,
and (C) if not theretofore paid in full, at maturity (whether by acceleration or
otherwise) of the Supplemental Term Loan.
(iii) Interest accrued on the principal balance of all other
Obligations shall be payable in immediately available funds in arrears (A) on
the last day of each calendar month, commencing on the first such day following
the incurrence of such Obligation, (B) upon repayment thereof in full or in
part, and (C) if not theretofore paid in full, at the time such other Obligation
becomes due and payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTION 2.02(a) or elsewhere in this Agreement, effective
immediately upon (i) the occurrence of an Event of Default described in
SECTION 10.01(a) or (ii) the occurrence of any other Event of Default and notice
from the Lender of the effectiveness of this SECTION 2.02(c), and for as long
thereafter as such Event of Default shall be continuing, the principal balance
of the Initial Term Loan, the principal balance of the Supplemental Term Loan
and the principal balance of all other Obligations, shall bear interest at a per
annum rate which is two percent (2.0%) per annum in excess of the interest rate
otherwise applicable under SECTION 2.02(a).
(d) COMPUTATION OF INTEREST. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on the
Term Loans, the date of the making of the Term Loans shall be included and the
date of payment shall be excluded.
2.03. AUTHORIZED OFFICERS AND AGENTS. On the Amendment and
Restatement Effective Date and from time to time thereafter when necessary, the
Borrower shall deliver to the Lender an Officer's Certificate setting forth the
names of the officers, employees and agents authorized to request a Borrowing
and containing a specimen signature of each such officer, employee or agent.
The officers, employees and agents so authorized shall also be authorized to act
for the Borrower in respect of all other matters relating to the Loan Documents.
The Lender shall be entitled to rely conclusively on such officer's or
employee's authority to request such Borrowing until the Lender receives
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written notice to the contrary. The Lender shall have no duty to verify the
authenticity of the signature appearing on any written Notice of Borrowing or
any other document, and, with respect to an oral request for such a Borrowing
the Lender shall have no duty to verify the identity of any person
representing himself or herself as one of the officers, employees or agents
authorized to make such request or otherwise to act on behalf of the
Borrower. The Lender shall incur no liability to the Borrower or any other
Person in acting upon any telephonic notice referred to above which the
Lender believes in good faith to have been given by a duly authorized officer
or other person authorized to borrow on behalf of the Borrower.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. The Borrower may, upon at least one (1)
Business Day's prior written notice to the Lender, at any time and from time to
time, prepay the Term Loans, in whole or in part. Unless the aggregate
outstanding principal balance of the Term Loans is to be prepaid in full,
voluntary prepayments of the Term Loans shall be in an aggregate minimum amount
of $100,000 and integral multiples of $100,000 in excess of that amount. Any
notice of prepayment given to the Lender under this SECTION 3.01(a) shall
specify the date (which shall be a Business Day) of prepayment, the aggregate
principal amount of the prepayment and whether such prepayment is to be applied
to the Initial Term Loan or the Supplemental Term Loan or both. When notice of
prepayment is delivered as provided herein, the principal amount of the Term
Loan(s) specified in the notice shall become due and payable on the prepayment
date specified in such notice. The prepayments described in this SECTION
3.01(a) may be made without premium or penalty.
(b) MANDATORY PREPAYMENTS/REDUCTIONS.
(i) After the payment in full of the "Obligations" under (and as
defined in) the Opco Credit Agreement and the "Obligations" under (and as
defined in) the RCL Loan Agreement, the Borrower shall make the following
prepayments in respect of the Term Loans:
(A) Within two (2) Business Days after the Borrower's or any of
its Subsidiaries' receipt of any Net Cash Proceeds of Sale, the
Borrower shall make or cause to be made a mandatory prepayment of the
Obligations in an amount equal to one hundred percent (100%) of such
Net Cash Proceeds of Sale.
(B) Within ninety (90) days after the end of each Fiscal Year,
the Borrower shall calculate Excess Cash
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Flow for such Fiscal Year and shall make a mandatory prepayment in
an amount equal to seventy-five percent (75%) of such Excess Cash
Flow. The Borrower shall make an additional mandatory prepayment
on the date on which annual reports are required to be delivered
by SECTION 6.01(c) to the extent 75% of Excess Cash Flow determined
in accordance with the annual reports exceeds 75% of the Borrower's
preliminary calculation of Excess Cash Flow.
(C) Within two (2) Business Days after the Borrower's or any of
its Subsidiaries' receipt of any Excess Proceeds of Issuance of Stock
or Indebtedness, the Borrower shall make or cause to be made a
mandatory prepayment in an amount equal to one hundred percent (100%)
of such Excess Proceeds of Issuance of Stock or Indebtedness.
(ii) Nothing in this SECTION 3.01(b) shall be construed to constitute
the Lender's consent to any transaction referred to in CLAUSE (i) above which is
not expressly permitted by ARTICLE VIII.
(iii) Each mandatory prepayment required by SECTION 3.01(b)(i) shall
be referred to herein as a "Designated Prepayment". The Borrower shall give the
Lender not less than one (1) Business Day's prior written notice or telephonic
notice promptly confirmed in writing, of the date on which each such Designated
Prepayment will be made (which date of prepayment shall be no later than the
date on which such Designated Payment becomes due and payable pursuant to this
SECTION 3.01(b)).
(iv) Designated Prepayments shall be allocated and applied to the
Obligations as follows: (A) FIRST, to the unpaid principal balance of the
Supplemental Term Loan and (B) SECOND, to the unpaid principal balance of the
Initial Term Loan.
3.02. PAYMENTS. (a) MANNER AND TIME OF PAYMENT. All payments and
prepayments of principal of and interest on the Term Loans and other Obligations
(including, without limitation, fees and expenses) which are payable to the
Lender shall be made without condition or reservation of right, in immediately
available funds (except to the extent otherwise permitted by SECTION
2.02(b)(i)), delivered to the Lender not later than 1:00 p.m. (Chicago time) on
the date and at the place due, to such account of the Lender as it may
designate; and funds received by the Lender not later than 1:00 p.m. (Chicago
time) on any given Business Day shall be credited against payment to be made
that day and funds received by the Lender after that time shall be deemed to
have been paid on the immediately following Business Day. All payments and
prepayments of Obligations shall be made in Dollars, and the Borrower waives any
right which it has under any Requirement of Law to repay the Obligations in a
currency other than Dollars.
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(b) APPLICATION OF PAYMENTS. (i) Subject to the provisions of
SECTIONS 3.01 AND 3.02(b)(ii), all payments of principal and interest in respect
of the Term Loans, all payments of fees and all other payments in respect of any
other Obligations, shall be applied FIRST, to pay all Obligations then due and
payable and SECOND, as the Borrower so designates.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Lender shall apply all payments in respect of any Obligations
and all proceeds of Collateral in the following order:
(A) FIRST, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lender;
(B) SECOND, to pay interest due in respect of the Supplemental
Term Loan;
(C) THIRD, to pay interest due in respect of the Initial Term
Loan;
(D) FOURTH, to the payment or prepayment of principal
outstanding on the Supplemental Term Loan;
(E) FIFTH, to the payment or prepayment of principal outstanding
on the Initial Term Loan; and
(F) SIXTH, to the payment of all other Obligations.
(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
by the Borrower hereunder or under any Term Note is stated to be due on a day
which is not a Business Day, the payment shall instead be due on the immediately
following Business Day, and any such extension of time shall be included in the
computation of the payment of interest and fees hereunder.
3.03. TAXES. (a) PAYMENT OF TAXES. Any and all payments by the
Borrower hereunder or under any Term Note or other document evidencing any
Obligations shall be made, in accordance with SECTION 3.02, free and clear of
and without reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, duties, and all stamp, transaction or
documentary taxes, excise taxes, ad valorem taxes and other taxes imposed on the
value of the Property, charges or levies which arise from the execution,
delivery or registration, or from payment or performance under, or otherwise
with respect to, any of the Loan Documents or the Term Loan Commitments and all
other liabilities with respect thereto (including any related interest,
penalties, fines and expenses in connection with any of them), excluding taxes
imposed on or measured by net income or overall gross receipts and capital and
franchise taxes imposed on the Lender by (i) the United States,
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(ii) the Governmental Authority of any jurisdiction in which the Lender has
an office or any political subdivision thereof or (iii) the Governmental
Authority in which the Lender is organized, managed and controlled or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and duties being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to withhold or deduct any
Taxes from or in respect of any sum payable hereunder or under any Term Note
or document to the Lender (x) the sum payable to the Lender shall be
increased as may be necessary so that after making all required withholding
or deductions (including withholding or deductions applicable to additional
sums payable under this SECTION 3.03) the Lender receives an amount equal to
the sum it would have received had no such withholding or deductions been
made, (y) the Borrower shall make such withholding or deductions, and (z) the
Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with applicable law.
(b) INDEMNIFICATION. The Borrower will indemnify the Lender
against, and reimburse the Lender on demand for, the full amount of all Taxes
(including, without limitation, any Taxes imposed by any Governmental Authority
on amounts payable under this SECTION 3.03 and any additional income or
franchise taxes resulting therefrom) incurred or paid by the Lender or any of
its Affiliates and any liability (including penalties, additions to tax,
interest, and out-of-pocket expenses paid to third parties) arising therefrom or
with respect thereto, whether or not such Taxes were lawfully payable. A
certificate as to any additional amount payable to any Person under this SECTION
3.03 submitted by it to the Borrower shall, absent manifest error, be final,
conclusive and binding upon all parties hereto. The Lender agrees, within a
reasonable time after receiving a written request from the Borrower, to provide
the Borrower with such certificates as are reasonably required, and take such
other actions as are reasonably necessary to claim such exemptions as the Lender
may be entitled to claim in respect of all or a portion of any Taxes which are
otherwise required to be paid or deducted or withheld pursuant to this SECTION
3.03 in respect of any payments under this Agreement or under any Term Note.
(c) RECEIPTS. Within thirty (30) days after the date of any payment
of Taxes by the Borrower, it will furnish to the Lender, at its address referred
to in SECTION 11.06, the original or a certified copy of a receipt evidencing
payment thereof.
3.04. PROMISE TO REPAY; EVIDENCE OF INDEBTEDNESS.
(a) PROMISE TO REPAY. The Borrower hereby agrees to pay when due the
principal amount of the Term Loans, and further agrees to pay all unpaid
interest accrued thereon, in accordance with the terms of this Agreement and the
respective Term Notes.
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(b) LOAN ACCOUNT. The Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to the Lender resulting from the Term Loans,
including the amount of principal and interest payable and paid to the Lender
from time to time hereunder and under the respective Term Notes.
(c) ENTRIES BINDING. The entries made in the Loan Account shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE IV
CONDITIONS TO SUPPLEMENTAL TERM LOAN
4.01. CONDITIONS PRECEDENT TO THE SUPPLEMENTAL TERM LOAN. The
obligation of the Lender to make the Supplemental Term Loan on the Amendment and
Restatement Effective Date shall be subject to the satisfaction of all of the
following conditions precedent:
(a) DOCUMENTS. The Lender shall have received on or before the
Amendment and Restatement Effective Date, duly executed and acknowledged where
appropriate and in form and substance satisfactory to the Lender, all of the
following:
(i) this Agreement, together with all Schedules hereto which
shall be in each case true, complete and correct in all material
respects as of the Amendment and Restatement Effective Date;
(ii) the Supplemental Term Note;
(iii) a Notice of Borrowing completed in accordance with the
provisions of Section 2.01(b);
(iv) the supplement to the Pledge Agreement in substantially the form
of EXHIBIT C-2 attached hereto and made a part hereof, executed by the
Borrower in favor of the Lender, reaffirming the pledge and grant of
security interest under the Pledge Agreement (the "Supplement to Pledge
Agreement");
(v) Uniform Commercial Code financing statements covering the
Collateral;
(vi) a favorable legal opinion, dated the Amendment and Restatement
Effective Date, addressed to the Lender, from O'Melveny & Myers LLP,
counsel to the Borrower, with respect to the Loan Documents and related
matters;
(vii) evidence that the Borrower has directed O'Melveny & Myers LLP to
prepare and deliver to the Lender the opinion described in CLAUSE (vi)
above;
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(viii) the PRO FORMA financials referred to in SECTION 5.01(g);
(ix) a certificate signed by the Vice President of the
Borrower certifying that all conditions precedent under this SECTION
4.01 have been met and no Potential Event of Default or Event of Default
has occurred or is continuing;
(x) a solvency certificate for the Borrower and its Subsidiaries,
duly executed by the chief financial officer or treasurer of such Person,
dated the Amendment and Restatement Effective Date and giving effect to the
Recoil Acquisition and the financing transactions contemplated under this
Agreement, supported by such analyses, valuations, appraisals, reviews,
projections and other documentation as the Lender deems appropriate;
(xi) documentation deemed adequate by the Lender showing the
Borrower's and its Subsidiaries' compliance with any financial
responsibility requirements of applicable Requirements of Law,
including, without limitation, those contained in 40 C.F.R. Parts 264
and 265, Subps. H, and state law equivalents, and those promulgated
pursuant to 42 U.S.C. Section 6991b(c)(6), and state equivalents; and
(xii) such additional documentation as the Lender may reasonably
request.
(b) PERFECTION OF LIENS. Evidence that all financing statements
relating to the Collateral have been filed where necessary to perfect the
Lender's security interest therein and all certificates representing Capital
Stock included in the Collateral have been delivered to the Lender (with duly
executed stock powers).
(c) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Lender shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain (A) the making of the Supplemental Term Loan on
the Amendment and Restatement Effective Date or (B) the consummation of the
Recoil Acquisition or (ii) impose or result in the imposition of a Material
Adverse Effect.
(d) NO DEFAULT. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
Supplemental Term Loan on the Amendment and Restatement Effective Date.
(e) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in SECTION 5.01 and in any of the other Loan Documents
shall be true and correct in all
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material respects on and as of the Amendment and Restatement Effective Date.
(f) THE RECOIL ACQUISITION. Substantially simultaneously with the
consummation of the transactions contemplated by this Agreement, the Opco Credit
Agreement and the RCL Loan Agreement, Opco shall have acquired substantially all
of the assets of Recoil U.S. pursuant to the Recoil U.S. Acquisition Agreement,
and Opco, RCL and, if designated by Opco to acquire the shares of Recoil U.K.,
Kaynar U.K. shall have acquired substantially all of the assets of Recoil
Australia pursuant to the Recoil Australia Acquisition Agreement and related
documents, in each case in compliance with all applicable Requirements of Law.
(g) ORGANIZATIONAL DOCUMENTS. The Lender shall have received copies,
certified to its satisfaction, of all Organizational Documents of the Borrower
and its Subsidiaries as in effect as of the Amendment and Restatement Effective
Date and determined them to be satisfactory in form and substance.
(h) NO MATERIAL ADVERSE EFFECT. No event has occurred since the
Initial Closing Date which has had or is reasonably likely to have a Material
Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. REPRESENTATIONS AND WARRANTIES. In order to induce the Lender
to enter into this Agreement and to make the Supplemental Term Loan and the
other financial accommodations to the Borrower, the Borrower hereby represents
and warrants to the Lender that the following statements are true, correct and
complete:
(a) ORGANIZATION; ORGANIZATIONAL POWERS. The Borrower and each of
its Subsidiaries (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) is duly qualified
to do business as a foreign corporation (or other entity) and is in good
standing under the laws of each jurisdiction in which failure to be so qualified
and in good standing will have or is reasonably likely to have a Material
Adverse Effect, (iii) to the extent required, has filed and maintained effective
(unless exempt from the requirements for filing) a current Business Activity
Report with the appropriate Governmental Authority in the states of Minnesota
and New Jersey, and (iv) has all requisite corporate power and authority to own,
operate and encumber its Property and to conduct its business as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Transaction Documents.
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(b) AUTHORITY. (i) The Borrower and each of its Subsidiaries have
the requisite corporate power and authority (A) to execute, deliver and perform
each of the Transaction Documents which are to be executed by it in connection
with the Purchase or the Recoil Acquisition or which have been executed by it as
required by this Agreement or the Existing Credit Agreement on or prior to the
Amendment and Restatement Effective Date and (B) to file the Transaction
Documents which must be filed by it in connection with the Purchase or the
Recoil Acquisition or which have been filed by it as required by this Agreement
or the Existing Credit Agreement on or prior to the Amendment and Restatement
Effective Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by the
Borrower or its Subsidiaries in connection with the Purchase or the Recoil
Acquisition or which have been executed or filed as required by this Agreement
or the Existing Credit Agreement on or prior to the Amendment and Restatement
Effective Date and to which the Borrower or any of its Subsidiaries is party and
the consummation of the transactions contemplated thereby, have been duly
approved by the respective boards of directors and, if necessary, the
shareholders of the Borrower and its Subsidiaries and such approvals have not
been rescinded. No other organizational action or proceedings on the part of
the Borrower or its Subsidiaries are necessary to consummate such transactions.
(iii) Each of the Transaction Documents to which the Borrower or any
of its Subsidiaries is a party has been duly executed, delivered or filed, as
the case may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, is in full force and effect
and no material term or condition thereof has been amended, modified or waived
from the terms and conditions contained in the Transaction Documents delivered
to the Lender pursuant to SECTION 4.01(a) without the prior written consent of
the Lender, and all parties thereto have performed and complied with all the
terms, provisions, agreements and conditions set forth therein and required to
be performed or complied with by such parties on or before the Amendment and
Restatement Date, and no Potential Event of Default, Event of Default or breach
of any covenant by any such party exists thereunder.
(c) CONSENTS. Except as set forth in SCHEDULE 5.01-C and for
approval of the Bankruptcy Court (solely with respect to the Purchase), no
consents or approvals of, or filings or registrations (other than filings or
registrations contemplated by SECTION 4.01(b) or 5.01(f)(i) with respect to
Government Contracts) by the Borrower or its Subsidiaries with any Governmental
Authority or any other Person not a party to this Agreement are necessary in
connection with the execution and delivery of the Transaction Documents by the
Borrower and its Subsidiaries and the consummation by the Borrower and its
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Subsidiaries of the transactions contemplated by the Transaction Documents,
except where the failure to obtain such consents or approvals would not result
in a Material Adverse Effect.
(d) SUBSIDIARIES; OWNERSHIP OF CAPITAL STOCK. SCHEDULE 5.01-D
accurately sets forth (i) the correct legal name, the jurisdiction of
incorporation and the jurisdictions in which qualified to transact business as a
foreign corporation of each of the direct and indirect Subsidiaries of the
Borrower, (ii) the authorized, issued and outstanding shares of each class of
Capital Stock of the Borrower and each of its Subsidiaries and the owners of
such shares, and (iii) a summary of the direct and indirect partnership, joint
venture, or other equity interests, if any, of the Borrower and each of its
Subsidiaries in any Person that is not a corporation. None of such issued and
outstanding Capital Stock is subject to any vesting or redemption agreement, or,
except as provided in the Shareholders Agreement, repurchase agreement, and
there are no warrants or options outstanding with respect to such Capital Stock.
The outstanding Capital Stock of the Borrower and each of its Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable.
(e) NO CONFLICT. The execution, delivery and performance of each of
the Transaction Documents to which the Borrower or any of its Subsidiaries is a
party do not and will not (i) conflict with the Organizational Documents of the
Borrower or any such Subsidiary, (ii) constitute a tortious interference with
any Contractual Obligation of any Person or conflict with, result in a breach of
or constitute (with or without notice or lapse of time or both) a default under
any Requirement of Law or Contractual Obligation of the Borrower or any such
Subsidiary, or require termination of any Contractual Obligation, the
consequences of which violation, breach, default or termination, singly or in
the aggregate, will have or is reasonably likely to have a Material Adverse
Effect or is reasonably likely to subject the Lender to any liability, or
(iii) result in or require the creation or imposition of any Lien whatsoever
upon any of the Property or assets of the Borrower or any such Subsidiary, other
than Liens contemplated by the Loan Documents, the Opco Loan Documents or the
RCL Loan Documents, as applicable.
(f) PATENTS, TRADEMARKS, PERMITS, ETC.; GOVERNMENT APPROVALS. (i)
After giving effect to the Purchase and the Recoil Acquisition, the Borrower and
each of its Subsidiaries own, are licensed or otherwise have the lawful right to
use, or have all permits and other governmental approvals (except with respect
to Government Contracts), patents, trademarks, trade names, copyrights,
technology, know-how and processes used in or necessary for the conduct of their
businesses as proposed to be conducted which are material to their condition
(financial or otherwise), operations, performance and prospects, taken as a
whole, including, without limitation, the names "Microdot", "Kaynar", "Microdot
Inserts" and "Recoil". With respect to each Government Contract acquired by
Opco or RCL in connection with
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the Purchase or the Recoil Acquisition, such Government Contract has been
transferred to Opco or RCL (and all necessary approvals therefor have been
obtained) or Opco or RCL is operating under a subcontract which is in full
force and effect.
(ii) The consummation of the Purchase, the Recoil Acquisition and the
transactions contemplated by the Transaction Documents will not impair the
ownership of or rights under (or the license or other right to use, as the case
may be) any permits and governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how or processes by the Borrower or any of
its Subsidiaries in any manner which has or is reasonably likely to have a
Material Adverse Effect.
(g) PRO FORMA FINANCIALS. The PRO FORMA consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries prepared as of
March 31, 1996 (and giving effect to the Recoil Acquisition) and in accordance
with GAAP consistently applied, copies of which have been furnished to the
Lender on or before the Amendment and Restatement Effective Date, fairly present
on a PRO FORMA basis the financial condition of the Borrower and such
Subsidiaries as of March 31, 1996, and reflect on a PRO FORMA basis those
liabilities reflected in the notes thereto and resulting from consummation of
the transactions contemplated by the Transaction Documents, and the payment or
accrual of all Transaction Costs payable on the Amendment and Restatement
Effective Date with respect to any of the foregoing. The projections and
assumptions expressed in the PRO FORMA financials furnished pursuant to this
SECTION 5.01(g) are reasonable based on the information available to the
Borrower as of the date hereof.
(h) SOLVENCY. After giving effect to the making of the Supplemental
Term Loan on the Amendment and Restatement Effective Date, the Borrower and each
of its Subsidiaries are Solvent.
(i) THE PURCHASE. (i) All conditions precedent to, and all consents
necessary to permit, the Purchase pursuant to the Purchase Documents have been
satisfied or delivered, or waived with the prior written consent of the Lender,
and no material breach of any term or provision of any Purchase Document has
occurred and no action has been taken by any competent authority which
restrains, prevents or imposes material adverse conditions upon, or seeks to
restrain, prevent or impose material adverse conditions upon, the Purchase or
the making of the Supplemental Term Loan hereunder.
(ii) After giving effect to the Purchase, Opco has acquired
substantially all of the assets of AFS pursuant to the AFS Purchase Agreement,
and, to the extent the assets of MAL have been made available in accordance with
the AFS Purchase Agreement, Opco and Kaynar U.K. have acquired substantially all
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of the assets of MAL pursuant to the MAL Purchase Agreement, in each case in
compliance with all applicable laws.
(j) THE RECOIL ACQUISITION. (i) All conditions precedent to, and
all consents necessary to permit, the Recoil Acquisition pursuant to the Recoil
Acquisition Documents have been satisfied or delivered, or waived with the prior
written consent of the Lender, and no material breach of any term or provision
of any Recoil Acquisition Document has occurred and no action has been taken by
any competent authority which restrains, prevents or imposes material adverse
conditions upon, or seeks to restrain, prevent or impose material adverse
conditions upon, the Recoil Acquisition or the making of the Supplemental Term
Loan hereunder.
(ii) After giving effect to the Recoil Acquisition, Opco has acquired
substantially all of the assets of Recoil U.S. pursuant to the Recoil U.S.
Acquisition Agreement, and Opco, RCL and, if designated by Opco to acquire the
shares of Recoil U.K., Kaynar U.K. have acquired substantially all of the assets
of Recoil Australia pursuant to the Recoil Australia Acquisition Agreement and
related documents, in each case in compliance with all applicable Requirements
of Law.
(k) PLEDGE OF COLLATERAL. The grant and perfection of the security
interest in the Capital Stock of Opco constituting a portion of the Collateral
for the benefit of the Lender, as contemplated by the terms of the Pledge
Agreement, is not made in violation of the registration provisions of the
Securities Act, any applicable provisions of other federal securities laws,
state securities or "Blue Sky" law, foreign securities law, or applicable
general corporation, limited liability company, unlimited liability company or
partnership law or in violation of any other Requirement of Law.
(l) PAYMENT OF TAXES. All tax returns and reports of each of the
Borrower and its Subsidiaries required to be filed have been timely filed, and
all taxes, assessments, fees and other governmental charges thereupon and upon
their respective Property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid, other than those which
are being contested in good faith by appropriate proceedings. The Borrower has
no knowledge of any proposed tax assessment (or similar claim) against the
Borrower or any of its Subsidiaries that will have or is reasonably likely to
have a Material Adverse Effect.
ARTICLE VI
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
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6.01. FINANCIAL STATEMENTS. The Borrower shall maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating financial statements in conformity with GAAP,
and each of the financial statements described below shall be prepared from such
system and records. The Borrower shall deliver or cause to be delivered to the
Lender:
(a) MONTHLY REPORTS. As soon as practicable, and in any event within
thirty (30) days after the end of each calendar month in each Fiscal Year, the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such calendar month and for the period from
the beginning of the then current Fiscal Year to the end of such calendar month,
setting forth in each case in comparative form the corresponding figures for the
corresponding calendar periods in the previous Fiscal Year and the corresponding
figures from the consolidated financial forecast for the current Fiscal Year
delivered pursuant to SECTION 6.01(f), certified by the chief financial officer
of the Borrower as fairly presenting the consolidated and consolidating
financial position of the Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the calendar
months indicated in accordance with GAAP, subject to normal year end
adjustments.
(b) QUARTERLY REPORTS. As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each Fiscal
Year, the consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such fiscal quarter and for the period from
the beginning of the then current Fiscal Year to the end of such fiscal quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the consolidated financial forecast for the current Fiscal Year delivered
pursuant to SECTION 6.01(f), certified by the chief financial officer of the
Borrower as fairly presenting the consolidated and consolidating financial
position of the Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
accordance with GAAP, subject to normal year end adjustments.
(c) ANNUAL REPORTS. As soon as practicable, and in any event within
one hundred twenty (120) days after the end of each Fiscal Year, (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such Fiscal Year and the related consolidated and
consolidating
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statements of income, stockholders' equity and cash flow of the Borrower and
its Subsidiaries for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered pursuant to SECTION 6.01(f), and (ii) a report
thereon of Arthur Andersen & Co. or other independent certified public
accountants of recognized standing and otherwise acceptable to the Lender,
which report shall be unqualified and shall state that such financial
statements fairly present the consolidated and consolidating financial
position of each of the Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except for changes with which Arthur Andersen & Co. or any such other
independent certified public accountants, if applicable, shall concur and
which shall have been disclosed in the notes to the financial statements) and
that the examination by such accountants in connection with such consolidated
and consolidating financial statements has been made in accordance with
generally accepted auditing standards.
(d) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement pursuant to PARAGRAPHS (b) and (c) of this SECTION 6.01, (i)
an Officer's Certificate of the Borrower substantially in the form of EXHIBIT E
attached hereto and made a part hereof, stating that the officer signatory
thereto has reviewed the terms of the Loan Documents, and has made, or caused to
be made under his supervision, a review in reasonable detail of the transactions
and consolidated and consolidating financial condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements,
that such review has not disclosed the existence during or at the end of such
accounting period, and that such officer does not have knowledge of the
existence as at the date of such Officer's Certificate, of any condition or
event which constitutes an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Borrower or any of its
Subsidiaries has taken, is taking and proposes to take with respect thereto; and
(ii) a certificate (the "Compliance Certificate"), signed by the Borrower's
chief financial officer, setting forth calculations and the methods of
determination thereof (with such specificity as the Lender may reasonably
request) for the period then ended which demonstrate compliance, when
applicable, with the provisions of ARTICLE IX.
(e) ACCOUNTANT'S STATEMENT AND PRIVITY LETTER. Together with each
delivery of the financial statements referred to in SECTION 6.01(c), a written
statement of the firm of independent certified public accountants giving the
report thereon (i) stating that their audit examination has included a review of
the terms of this Agreement as it relates to accounting
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matters, (ii) stating whether, in connection with their audit examination,
any condition or event which constitutes an Event of Default or Potential
Event of Default has come to their attention, and if such condition or event
has come to their attention, specifying the nature and period of existence
thereof; PROVIDED, that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such condition or event that would not be
disclosed in the course of their audit examination, and (iii) stating that
based on their audit examination nothing has come to their attention which
causes them to believe that the information contained in either or both of
the certificates delivered therewith pursuant to SECTION 6.01(d) is not
correct or that the matters set forth in the Compliance Certificate delivered
therewith pursuant to SECTION 6.01(d)(ii) for the applicable Fiscal Year are
not stated in accordance with the terms of this Agreement. The statement
referred to above shall be accompanied by (x) a copy of the management letter
or any similar report delivered to the Borrower or to any officer or employee
thereof by such accountants in connection with such financial statements and
(y) a letter from the Borrower to such accountants informing such accountants
that the Lender is relying upon the financial statements audited by such
accountants and delivered to the Lender pursuant to SECTION 6.01(c) and that
a primary intent of the Borrower in having such financial statements audited
is to induce the Lender to continue to make financial accommodations to the
Borrower under this Agreement. The Lender may, with the consent of the
Borrower (which consent shall not be unreasonably withheld), communicate
directly with such accountants.
(f) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than thirty (30) days prior to the
commencement of each Fiscal Year of the Borrower, (i) a monthly budget for such
Fiscal Year; (ii) an annual business plan for such Fiscal Year, in form and
substance acceptable to the Lender, accompanied by a report reconciling all
changes and departures from the business plan delivered to the Lender for the
preceding Fiscal Year; and (iii) a consolidated plan and financial forecast,
prepared in accordance with the Borrower's normal accounting procedures applied
on a consistent basis, for such Fiscal Year and the two (2) immediately
succeeding Fiscal Years, including, without limitation, (A) a forecasted
consolidated balance sheet and a consolidated statement of changes in financial
position of the Borrower for such Fiscal Years, (B) forecasted consolidated
balance sheets, statements of earnings and retained earnings, and changes in
financial position of the Borrower for and as of the end of each fiscal quarter
of such Fiscal Years, (C) the amount of forecasted Capital Expenditures and
Excess Cash Flow for such Fiscal Years, and (D) forecasted compliance with the
provisions of ARTICLE IX for such Fiscal Years.
6.02. OPERATIONS REPORTS. Accompanying the reports to be delivered by
the Borrower each fiscal quarter in each Fiscal
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Year pursuant to SECTION 6.01(b) and, in addition to the foregoing, within
seven (7) days after the Lender's request therefor, the Borrower shall
deliver to the Lender a report detailing the operations of the Borrower and
its Subsidiaries which report shall include a management discussion and
analysis with respect to the Borrower's and its Subsidiaries' financial
performance during such period, including a comparison of actual sales versus
budgeted sales for such fiscal quarter, a discussion of bookings, a listing
of significant new customers and new products developed for sale, an
explanation of any cost saving measures implemented, together with a
discussion of the general business environment and results of operations,
including an explanation of any material changes in consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such period from such statements for the
corresponding period of the previous Fiscal Year and the corresponding
figures from the consolidated financial forecast for the current Fiscal Year
pursuant to SECTION 6.01(f) (the "Management Discussion and Analysis").
6.03. EVENTS OF DEFAULT. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Borrower obtaining knowledge (a) of any condition or event
which constitutes an Event of Default or Potential Event of Default, or becoming
aware that the Lender has given any notice with respect to a claimed Event of
Default or Potential Event of Default under this Agreement, (b) that any Person
has given any notice to the Borrower or any Subsidiary of the Borrower or taken
any other action with respect to a claimed default or event or condition of the
type referred to in SECTION 10.01(e), or (c) of any condition or event which has
or is reasonably likely to have a Material Adverse Effect, the Borrower shall
deliver to the Lender an Officer's Certificate specifying (A) the nature and
period of existence of any such claimed default, Event of Default, Potential
Event of Default, condition or event, (B) the notice given or action taken by
such Person in connection therewith, and (C) what action the Borrower has taken,
is taking and proposes to take with respect thereto.
6.04. LAWSUITS. (a) Promptly upon the Borrower obtaining knowledge
of the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Borrower or
any of its Subsidiaries or any Property of the Borrower or any of its
Subsidiaries, which action, suit, proceeding, governmental investigation or
arbitration exposes, or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which expose, in the Borrower's reasonable
judgment, the Borrower or any of its Subsidiaries to liability in an amount
aggregating $100,000 or more (exclusive of claims covered by insurance policies
of the Borrower or any of its Subsidiaries unless the insurers of such claims
have disclaimed
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coverage or reserved the right to disclaim coverage on such claims), the
Borrower shall give written notice thereof to the Lender and provide such
other information as may be reasonably available to enable the Lender and its
counsel to evaluate such matters; (b) as soon as practicable and in any event
within forty-five (45) days after the end of each fiscal quarter of the
Borrower, the Borrower shall provide a written quarterly report to the Lender
covering the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration (not previously
reported) against or affecting the Borrower or any of its Subsidiaries or any
Property of the Borrower or any of its Subsidiaries not previously disclosed
by the Borrower to the Lender, and shall provide such other information at
such time as may be reasonably available to enable the Lender and its counsel
to evaluate such matters (but excluding such information at to which the
Borrower in good faith has asserted or will assert a legal privilege in
objection to disclosure of the information by the Borrower in the action,
suit, proceeding, investigation or arbitration); and (c) in addition to the
requirements set forth in CLAUSES (a) and (b) of this SECTION 6.04, the
Borrower upon request of the Lender shall promptly give written notice of the
status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered pursuant to CLAUSE (a) or (b) above
and provide such other information as may be reasonably available to it to
enable the Lender and its counsel to evaluate such matters.
6.05. INSURANCE. As soon as practicable and in any event by the last
day of April in each Fiscal Year, the Borrower shall deliver to the Lender (a)
a report in form and substance reasonably satisfactory to the Lender outlining
all material insurance coverage maintained as of the date of such report by the
Borrower and its Subsidiaries and the duration of such coverage and (b) evidence
that all premiums with respect to such coverage have been paid when due.
6.06. ERISA NOTICES. The Borrower shall deliver or cause to be
delivered to the Lender, at the Borrower's expense, the following information
and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer of
the Borrower describing such Termination Event and the action, if any,
which the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and when known, any action
taken or threatened by the IRS, DOL or PBGC with respect thereto;
(b) within ten (10) Business Days after the Borrower or any of
its Subsidiaries knows or has reason
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to know that an assessment of a prohibited transaction excise tax under
Section 4975 of the Internal Revenue Code has occurred, a statement of
the chief financial officer of the Borrower describing such transaction
and the action which the Borrower or any ERISA Affiliate has taken, is
taking or proposes to take with respect thereto;
(c) upon the request of the Lender, copies of each annual report
(form 5500 series), including Schedule B thereto, filed with the DOL,
IRS or PBGC with respect to each Benefit Plan;
(d) within ten (10) Business Days after the filing of the same
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by the Borrower or
any ERISA Affiliate with respect to such request;
(e) within ten (10) Business Days after the occurrence any
material increase in the benefits of any existing Benefit Plan or the
establishment of any new Benefit Plan or the commencement of
contributions to any Benefit Plan to which the Borrower or any ERISA
Affiliate was not previously contributing, notification of such
increase, establishment or commencement;
(f) within three (3) Business Days after the Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice;
(g) within ten (10) Business Days after the Borrower or any of
its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Internal Revenue Code, copies of each such
letter;
(h) within ten (10) Business Days after the Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding
the imposition of withdrawal liability, copies of each such notice;
(i) within three (3) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or payment, a notification of
such failure;
(j) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to
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know (A) a Multiemployer Plan has been terminated, (B) the administrator
or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (C) the PBGC has instituted or will institute
proceedings under Section 4042 of ERISA to terminate a Multiemployer
Plan; and
(k) within ten (10) Business Days after the Borrower receives
written notice from the Lender requesting the same, copies of any
Foreign Employee Benefit Plan and related documents, reports and
correspondence specified in such notice.
For purposes of this SECTION 6.06, the Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the Administrator of any Plan of which the
Borrower or any ERISA Affiliate is the plan sponsor.
6.07. ENVIRONMENTAL NOTICES. (a) The Borrower shall notify the
Lender in writing, within five (5) days after the Borrower's learning thereof,
of any:
(i) notice or claim to the effect that the Borrower or any of
its Subsidiaries is or can reasonably be expected to be liable to any
Person as a result of the Release or threatened Release of any
Contaminant;
(ii) notice that the Borrower or any of its Subsidiaries is
subject to investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to the Release or
threatened Release of any Contaminant;
(iii) notice that any Property of the Borrower or any of its
Subsidiaries is subject to an Environmental Lien;
(iv) notice of violation to the Borrower or any of its
Subsidiaries of any Environmental Law;
(v) condition which might reasonably result in a violation of
any Environmental Law;
(vi) commencement or threat of any judicial or administrative
proceeding alleging a violation by the Borrower or any of its
Subsidiaries of any Environmental Law;
(vii) new or proposed changes to any existing Environmental Law
that could result in a Material Adverse Effect;
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(viii) any Release of a Contaminant which requires, or is
reasonably likely to require, (A) Remedial Action which is subject to
review or approval by any Governmental Authority or (B) reporting to
any Governmental Authority; or
(ix) any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by the Borrower or any of its
Subsidiaries that is reasonably likely to subject the Borrower or any
of its Subsidiaries to environmental, health or safety Liabilities and
Costs.
(b) Within forty-five (45) days after the end of each Fiscal Year,
the Borrower shall submit to the Lender a report summarizing the status of
environmental, health or safety compliance, hazard or liability issues
identified in notices required pursuant to SECTION 6.07(a) or identified in any
notice or report required herein.
6.08. LABOR MATTERS. The Borrower shall notify the Lender in
writing, promptly upon the Borrower's learning thereof, of (a) any material
labor dispute to which the Borrower or any of its Subsidiaries may become a
party, including, without limitation, any strikes, lockouts or other disputes
relating to such Persons' plants and other facilities and (b) any liability
incurred with respect to the closing of any plant or other facility of the
Borrower or any of its Subsidiaries.
6.09. GOVERNMENT CONTRACT NOTICES. The Borrower shall notify the
Lender in writing, within three (3) Business Days after the Borrower's learning
thereof, of any of the following:
(a) The DOD, any other United States Governmental Authority, any
prime contractor, subcontractor or other Person has notified the Borrower
or any of its Subsidiaries that the Borrower or such Subsidiary has
breached or violated in any material respect any Requirement of Law,
certification, representation, clause, provision or requirement pertaining
to any Government Contract;
(b) A termination for default, termination for convenience, cure
notice or show cause notice is in effect with respect to any Government
Contract;
(c) Any cost incurred pertaining to any Government Contract has been
questioned or challenged, is the subject of any investigation or has been
disallowed by any United States Governmental Authority;
(d) Any money due to the Borrower or any of its Subsidiaries
pertaining to any Government Contact is withheld, or is the subject of an
attempt to withhold, or is reduced through exercise of a right of set-off
or otherwise;
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(e) The commencement or threat of any action, suit, investigation or
proceeding relating to any Government Contact, or relating to any proposed
suspension or debarment of the Borrower, any of its Subsidiaries or any of
their respective employees or agents, against the Borrower, such
Subsidiary, such other Person or any Property;
(f) The discovery of any irregularity, misstatement or omission
arising under or relating to any Government Contract that could reasonably
be expected to lead to (i) an administrative, civil or criminal
investigation, indictment or information with respect to the Borrower, any
of its Subsidiaries or any of their respective directors, officers,
employees, consultants or agents, (ii) disclosure of such irregularity,
misstatement or omission to any Governmental Authority or (iii) material
damage, penalty assessment, recoupment of payment or disallowance of cost;
or
(g) The existence of (i) any outstanding material Claims against the
Borrower, its Subsidiaries or any Property, either by a United States
Governmental Authority or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Government Contract, or
(ii) any material dispute between the Borrower or any of its Subsidiaries,
on the one hand, and any United States Governmental Authority, any prime
contractor, subcontractor, vendor or other third party, on the other hand,
arising under or relating to any Government Contract.
6.10. OTHER INFORMATION. Promptly upon receiving a request therefor
from the Lender, the Borrower shall prepare and deliver to the Lender such other
information with respect to the Borrower, any of its Subsidiaries, or the
Collateral, including, without limitation, schedules identifying and describing
the Collateral and any dispositions thereof, as from time to time may be
reasonably requested by the Lender.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent:
7.01. ORGANIZATIONAL EXISTENCE, ETC. Except as permitted by SECTION
8.09, the Borrower shall, and shall cause each of its Subsidiaries to, at all
times maintain its organizational existence and preserve and keep, or cause to
be preserved and kept, in full force and effect its rights and franchises
material to its businesses, except where the loss or termination of such rights
and franchises is not likely to have a Material Adverse Effect.
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7.02. ORGANIZATIONAL POWERS; CONDUCT OF BUSINESS. The Borrower
shall, and shall cause each of its Subsidiaries to qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified.
7.03. COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall
cause its Subsidiaries to, (a) comply with all Requirements of Law and all
restrictive covenants affecting such Person or the business, Property, assets
or operations of such Person, and (b) obtain as needed all Permits necessary
for its operations and maintain such Permits in good standing, except in the
case where noncompliance with either CLAUSE (a) or (b) above is not
reasonably likely to have a Material Adverse Effect.
7.04. PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The
Borrower shall pay, and cause each of its Subsidiaries to pay, (a) all taxes,
assessments and other governmental charges imposed upon it or on any of its
Property or assets or in respect of any of its franchises, business, income
or Property before any penalty, addition to tax or interest accrues thereon,
and (b) all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable
and which by law have or may become a Lien (other than a Lien permitted by
SECTION 8.03) upon any of the Borrower's or such Subsidiary's Property or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; PROVIDED, HOWEVER, that no such taxes, assessments and
governmental charges referred to in CLAUSE (a) above or claims referred to in
CLAUSE (b) above need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor. The Borrower will not, nor will it permit any
of its Subsidiaries to, file or consent to the filing of any consolidated
income tax return with any Person (other than with the Borrower, Opco or any
of their respective Subsidiaries).
7.05. INSURANCE. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full
force and effect the insurance policies and programs listed on SCHEDULE
5.01-X of the Opco Credit Agreement or substantially similar policies and
programs or other policies and programs as are acceptable to the Lender and,
upon the request of the Lender, such other insurance which in the sole and
reasonable judgment of the Lender, is necessary or desirable to increase the
likelihood of the repayment of the Obligations. All such policies and
programs shall be maintained with insurers acceptable to the Lender. Each
certificate and policy relating to Property damage, boiler and machinery
and/or business interruption coverage shall contain an endorsement, in form
and substance acceptable to the Lender, showing loss payable to the Lender,
and, if required by the Lender, naming the Lender as an additional insured
under such policy. Each certificate and
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policy relating to coverages other than the foregoing shall, if required by
the Lender, contain an endorsement naming the Lender as an additional insured
under such policy. Such endorsement or an independent instrument furnished
to the Lender shall provide that the insurance companies will give the Lender
at least thirty (30) days' written notice before any such policy or policies
of insurance shall be altered adversely to the interests of the Lender or
cancelled and that no act, whether willful or negligent, or default of the
Borrower, any of its Subsidiaries or any other Person shall affect the right
of the Lender to recover under such policy or policies of insurance in case
of loss or damage. In the event the Borrower or any of its Subsidiaries, at
any time or times hereafter shall fail to obtain or maintain any of the
policies or insurance required herein or to pay any premium in whole or in
part relating thereto, then the Lender, without waiving or releasing any
obligations or resulting Event of Default hereunder, may at any time or times
thereafter (but shall be under no obligation to do so) obtain and maintain
such policies of insurance and pay such premiums and take any other action
with respect thereto which the Lender deems advisable. All sums so disbursed
by the Lender shall be part of the Obligations, payable as provided in this
Agreement.
7.06. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The
Borrower shall permit, and cause each of its Subsidiaries to permit, any
authorized representative(s) designated by the Lender to visit and inspect
any of the Properties of the Borrower or any of its Subsidiaries, to examine,
audit, check and make copies of their respective financial and accounting
records, books, journals, orders, receipts and any correspondence and other
data relating to their respective businesses or the transactions contemplated
hereby, by the Purchase Documents or by the Recoil Acquisition Documents
(including, without limitation, in connection with environmental compliance,
hazard or liability or any Government Contract), and to discuss their
affairs, finances and accounts with their officers and independent certified
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours, as often as may be reasonably requested. At
the request of the Lender and upon delivery to the Borrower of invoices
therefor, each such visitation and inspection shall be at the Borrower's
expense. The Borrower shall keep and maintain, and cause its Subsidiaries to
keep and maintain, in all material respects proper books of record and
account in which entries in conformity with GAAP shall be made of all
dealings and transactions in relation to their respective businesses and
activities, including, without limitation, transactions and other dealings
with respect to the Collateral. If an Event of Default has occurred and is
continuing, the Borrower, upon the Lender's request, shall turn over copies
of any such records to the Lender or its representatives.
7.07. INSURANCE AND CONDEMNATION PROCEEDS. After the payment in full
of the "Obligations" under (and as defined in)
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the Opco Credit Agreement and the "Obligations" under (and as defined in) the
RCL Loan Agreement, the Borrower shall direct (and, if applicable, shall
cause its Subsidiaries to direct) all insurers under policies of Property
damage, boiler and machinery and business interruption insurance and payors
of any condemnation claim or award relating to the Property to pay all
proceeds payable under such policies or with respect to such claim or award
directly to the Lender, and in no case to the Borrower or one or more of its
Subsidiaries and the Lender. Such proceeds shall constitute Net Cash
Proceeds of Sale and shall be applied to the Obligations in accordance with
SECTION 3.01(b)(iv).
7.08. ERISA COMPLIANCE. The Borrower shall, and shall cause each
of its Subsidiaries and ERISA Affiliates to, establish, maintain and operate
all Plans to comply in all material respects with the provisions of ERISA,
the Internal Revenue Code, all other applicable laws, and the regulations
thereunder and the respective requirements of the governing documents for
such Plans.
7.09. FOREIGN EMPLOYEE BENEFIT PLAN COMPLIANCE. The Borrower
shall, and shall cause each of its Subsidiaries and ERISA Affiliates to,
establish, maintain and operate all Foreign Employee Benefit Plans to comply
in all material respects with all laws and regulations applicable thereto and
the respective requirements of the governing documents for such Plans.
7.10. GOVERNMENT CONTRACT COMPLIANCE. The Borrower shall, and
shall cause each of its Subsidiaries to (a) maintain all Permits pertaining
to Government Contracts required to operate the Borrower's business as it is
currently conducted, including, without limitation, (i) all Facility Security
Clearance(s) and Personnel Security Clearance(s), (ii) all certifications of
products manufactured by the Borrower which are on the "Qualified Products
List" of any United States Governmental Authority, and (iii) all Export
Licenses and other similar Permits; and (b) comply in all material respects
with all Requirements of Law and Contractual Obligations pertaining to each
Government Contract.
7.11. ENVIRONMENTAL COMPLIANCE. The Borrower shall, and shall
cause each of its Subsidiaries to (a) obtain and maintain in effect all
Permits required by Environmental Law and comply with all conditions of such
Permits; (b) comply with all Environmental Law applicable to the Borrower and
its Subsidiaries; and (c) conduct its and their operations in an
environmentally responsible manner so as to minimize Releases of Contaminants
and the likelihood of violating Environmental Law, except in the case where
non-compliance with any of clause (a) or (b) or (c) above will not have or
result in a Material Adverse Effect.
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7.12. MAINTENANCE OF PROPERTY. The Borrower shall, and shall
cause each of its Subsidiaries to, maintain in all material respects all of
their respective owned and leased Property in good, safe and insurable
condition and repair, and not permit, commit or suffer any waste or
abandonment of any such Property and from time to time shall make or cause to
be made all material repairs, renewal and replacements thereof, including,
without limitation, any capital improvements which may be required; PROVIDED,
HOWEVER, that such Property may be altered or renovated in the ordinary
course of business.
7.13. CONDEMNATION. Immediately upon learning of the institution
of any proceeding for the condemnation or other taking of any of the owned or
leased Real Property of the Borrower or any of its Subsidiaries, the Borrower
shall notify the Lender of the pendency of such proceeding, and permit the
Lender to participate in any such proceeding, and from time to time will
deliver to the Lender all instruments reasonably requested by the Lender to
permit such participation.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligations
are outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent:
8.01. INDEBTEDNESS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly create, incur, assume or otherwise
become or remain directly or indirectly liable with respect to any
Indebtedness, except:
(i) the Obligations;
(ii) trade payables, wages and other accrued expenses incurred
in the ordinary course of business;
(iii) the Transaction Costs;
(iv) to the extent permitted by ARTICLE IX, the Opco Credit
Agreement and the RCL Loan Agreement and in any event in an aggregate
amount not to exceed $3,000,000 at any time, Capital Leases and
purchase money Indebtedness incurred to finance the acquisition of
fixed assets, and Indebtedness incurred to refinance such Capital
Leases and purchase money Indebtedness;
(v) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent
that payment thereof is not required pursuant to SECTION 7.04;
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(vi) Indebtedness constituting Accommodation Obligations
permitted by SECTION 8.05;
(vii) Indebtedness arising from intercompany loans from the
Borrower to Opco or from any of Opco's wholly-owned Subsidiaries to
Opco, PROVIDED, that (A) all such Indebtedness shall be evidenced by
promissory notes (which, if payable to RCL, Recoil Holdings or Recoil
Australia Holdings, shall be delivered to the Lender in accordance
with the RCL Loan Documents), shall be subordinated in right of
payment to the "Obligations" under (and as defined in) the Opco Credit
Agreement and (B) the proceeds of such Indebtedness shall be used for
purposes permitted by this Agreement;
(viii) Indebtedness arising from intercompany loans from Opco to
the Borrower which, together with the amount of dividends or
distributions to the Borrower on the Capital Stock of Opco permitted
under SECTION 8.06(ii), shall not exceed an aggregate amount of
$600,000 in any Fiscal Year, PROVIDED, that (A) all such Indebtedness
shall be evidenced by promissory notes which are pledged to the Lender
in accordance with the provisions of the "Security Agreement" (as
defined in the Opco Credit Agreement) and (B) the proceeds of such
intercompany loans, dividends or distributions shall be used by the
Borrower solely to pay (I) operating expenses of the Borrower in an
amount not to exceed $50,000 in any Fiscal Year, (II) accrued interest
on the Term Loans or the PIK Dividend Notes (including, without
limitation, that portion of the principal amount of the Initial Term
Loan or the PIK Dividend Notes attributable to interest which has been
capitalized in accordance with this Agreement or the PIK Dividend Note
Agreement, as applicable) and (III) if and only if all accrued
interest on the Term Loans and the PIK Dividend Notes (including,
without limitation, that portion of the principal amount of the
Initial Term Loan or the PIK Dividend Notes attributable to interest
which has been capitalized in accordance with this Agreement or the
PIK Dividend Note Agreement, as applicable) as of the then most recent
date on which interest on any Term Loan or the PIK Dividend Notes is
payable has been (or will be concurrently therewith) paid in full in
cash, dividends or distributions on the Preferred Stock of the
Borrower;
(ix) In addition to the intercompany loans from Opco to the
Borrower permitted under SECTION 8.01(viii), Indebtedness arising from
intercompany loans from Opco to the Borrower, the proceeds of which,
together with the proceeds of dividends or distributions to the
Borrower on the Capital Stock of
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Opco permitted under SECTION 8.06(iv), are used to pay the outstanding
Indebtedness under this Agreement and the respective Term Notes on the
Scheduled Maturity Date;
(x) Indebtedness with respect to reasonable warranties and
indemnities made under any agreements for asset sales permitted under
SECTION 8.02;
(xi) Indebtedness under the PIK Dividend Notes issued in payment
of dividends on Preferred Stock permitted by SECTION 8.06 and interest
capitalized in accordance with the terms of the PIK Dividend Note
Agreement;
(xii) Indebtedness under the Opco Credit Agreement and any
refinancing thereof, provided that the aggregate outstanding amount of
Indebtedness described in this clause (xii) is not increased by the
refinancing;
(xiii) Indebtedness with respect to warranties and indemnities in
favor of Recoil Australia, Recoil U.S. and the Vendors under the Recoil
Acquisition Documents;
(xiv) Indebtedness under the RCL Loan Agreement and any
refinancing thereof, provided that the aggregate outstanding amount of
Indebtedness described in this clause (xiv) is not increased by the
refinancing; and
(xv) Permitted Existing Indebtedness.
8.02. SALES OF ASSETS. Neither the Borrower nor any of its
Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose
of any Property, whether now owned or hereafter acquired, or any income or
profits therefrom, or enter into any agreement to do so, except:
(i) the sale of Property having an aggregate Fair Market Value
of not more than $1,000,000 in any Fiscal Year for cash consideration
not less than the Fair Market Value thereof, PROVIDED that the
Borrower complies with the mandatory prepayment provisions set forth
in SECTION 3.01(b), Opco complies with the mandatory prepayment
provisions set forth in SECTION 3.01(b) of the Opco Credit Agreement
or RCL complies with the mandatory prepayment provisions set forth in
SECTION 3.01(b) of the RCL Loan Agreement (as applicable);
(ii) the transfer of Property from a Subsidiary of Opco to Opco;
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(iii) sales of Inventory, dispositions of Equipment and
licensing of General Intangibles, in each case as permitted by the
Opco Loan Documents or the RCL Loan Documents (as applicable); and
(iv) any Investment permitted under SECTION 8.04.
8.03. LIENS. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or permit to exist any
Lien on or with respect to any of their respective Property or assets except:
(i) Liens created by the Loan Documents, the Opco Loan Documents
and the RCL Loan Documents;
(ii) Customary Permitted Liens;
(iii) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of the Borrower's or such Subsidiary's purchase thereof) securing
an amount not to exceed $3,000,000 in the aggregate at any time or
from time to time, PROVIDED, that such Liens shall not apply to any
Property of the Borrower or its Subsidiaries other than that purchased
or subject to such Capital Lease; and
(iv) Permitted Existing Liens.
8.04. INVESTMENTS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iii) contributions to and payments of benefits under any Plan
(in accordance with the terms of the Plan) permitted by this
Agreement;
(iv) Investments (in an aggregate unrecovered amount not to exceed
$1,400,000) by Opco in Kaynar U.K. and by Kaynar U.K. in Recoil U.K.,
including, without limitation, Opco's ownership of the Capital Stock of
Kaynar U.K. and Kaynar U.K.'s ownership of the Capital Stock of Recoil
U.K.;
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(v) Investments arising from intercompany loans which are
permitted under SECTION 8.01(vii), 8.01(viii) or 8.01(ix);
(vi) Investments (in each case in an aggregate unrecovered
amount not to exceed $12,000,000) by Opco in Recoil Holdings and
Recoil Australia Holdings and by Recoil Holdings and Recoil Australia
Holdings in RCL, including, without limitation, Opco's ownership of
the Capital Stock of Recoil Holdings and Recoil Australia Holdings and
Recoil Holding's and Recoil Australia Holdings's ownership of the
Capital Stock of RCL; and
(vii) Investments (in an aggregate unrecovered amount not to
exceed $600,000) by Opco in Kaynar Femipari, including, without
limitation, Opco's ownership of the Capital Stock of Kaynar Femipari;
and
(viii) Investments in Opco's Subsidiaries (other than those permitted
by CLAUSES (iv), (vi) and (vii)) in existence, and in the unrecovered
amounts, on the Amendment and Restatement Effective Date.
8.05. ACCOMMODATION OBLIGATIONS. Neither the Borrower nor any of
its Subsidiaries shall directly or indirectly create or become or be liable
with respect to any Accommodation Obligation, except:
(i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of
business;
(ii) Permitted Existing Accommodation Obligations;
(iii) Accommodation Obligations arising under the Loan Documents
or the Opco Loan Documents; and
(iv) Accommodation Obligations of Recoil Holdings and Recoil
Australia Holdings arising under the RCL Loan Documents.
8.06. RESTRICTED JUNIOR PAYMENTS. Neither the Borrower nor any of
its Subsidiaries shall declare or make any Restricted Junior Payment, except
for:
(i) dividends or distributions to Opco on the Capital Stock of
any of Opco's wholly-owned Subsidiaries;
(ii) for so long as no Event of Default has occurred and is
continuing, dividends or distributions to the Borrower on the Capital
Stock of Opco which, together with the principal amount of
intercompany
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loans from Opco to the Borrower permitted under SECTION 8.01(viii), shall
not exceed an aggregate amount of $600,000 in any Fiscal Year, PROVIDED,
that the proceeds of such intercompany loans, dividends or distributions
shall be used by the Borrower solely to pay (A) operating expenses of the
Borrower in an amount not to exceed $50,000 in any Fiscal Year, (B) accrued
interest on the Term Loans or the PIK Dividend Notes (including, without
limitation, that portion of the principal amount of the Initial Term Loan
or the PIK Dividend Notes attributable to interest which has been
capitalized in accordance with this Agreement or the PIK Dividend Note
Agreement, as applicable) and (C) if and only if all accrued interest on
the Term Loans and the PIK Dividend Notes (including, without limitation,
that portion of the principal amount of the Initial Term Loan or the PIK
Dividend Notes attributable to interest which has been capitalized in
accordance with this Agreement or the PIK Dividend Note Agreement, as
applicable) as of the then most recent date on which interest on any
Term Loan or the PIK Dividend Notes is payable has been (or will
concurrently therewith) paid in full in cash, dividends or
distributions on the Preferred Stock of the Borrower;
(iii) dividends or distributions on the Preferred Stock of the
Borrower in PIK Dividend Notes to the extent permitted by the PIK
Dividend Note Agreement or in cash to the extent permitted by SECTION
8.06(ii)(C), PROVIDED, HOWEVER, that no such dividends or
distributions may be made or paid in any fiscal quarter of the
Borrower in which an Event of Default has occurred or is continuing
and the Lender has delivered written notice to the Borrower that such
dividends or distributions are prohibited under this SECTION 8.06,
PROVIDED, FURTHER, HOWEVER, that if such Event of Default is the
result of a breach of any covenant in ARTICLE IX of this Agreement,
such Event of Default shall be deemed to be cured solely for purposes
of permitting the payment of dividends or distributions under this
SECTION 8.06 upon the Borrower's compliance with such covenant for
each of the two (2) fiscal quarters immediately following the fiscal
quarter with respect to which such Event of Default occurred; and
(iv) in addition to the dividends and distributions to the
Borrower on the Capital Stock of Opco permitted under SECTION
8.06(ii), dividends and distributions to the Borrower on the Capital
Stock of Opco, the proceeds of which, together with the proceeds of
intercompany loans from Opco to the Borrower permitted under SECTION
8.01(ix), are used to pay the outstanding Indebtedness under this
Agreement and the respective Term Notes on the Scheduled Maturity
Date.
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8.07. CONDUCT OF BUSINESS. Neither the Borrower nor any of its
Subsidiaries shall engage in any business other than (i) the businesses engaged
in by AFS on the Initial Closing Date, (ii) the businesses engaged in by Recoil
Australia and its Subsidiaries on the Amendment and Restatement Effective Date
and (iii) the business or activities which are substantially similar, related or
incidental thereto; PROVIDED, HOWEVER, that Recoil Holdings and Recoil Australia
Holdings shall not engage in any business other than the holding of the Capital
Stock of RCL and, in the case of Recoil Holdings, one share of the Capital Stock
of Recoil Belgium.
8.08. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the
Borrower nor any of its Subsidiaries shall directly or indirectly enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any holder or holders of more than five percent (5%) of any class of equity
Securities of the Borrower or Opco, or with any Affiliate of the Borrower which
is not its Subsidiary, on terms that are less favorable to the Borrower or any
of its Subsidiaries, as applicable, than those that might be obtained in an
arm's length transaction at the time from Persons who are not such a holder or
Affiliate. Nothing contained in this SECTION 8.08 shall prohibit (i) any
transaction expressly permitted by SECTIONS 8.01, 8.05 or 8.06; (ii) increases
in compensation and benefits for officers and employees of the Borrower or any
of its Subsidiaries which are customary in the industry or consistent with the
past business practice of the Borrower or such Subsidiary, PROVIDED, that no
Event of Default or Potential Event of Default has occurred and is continuing;
(iii) payment of customary directors' fees and indemnities; (iv) performance of
any obligations arising under the Transaction Documents or the Shareholders
Agreement; or (v) transactions between the Borrower and Opco or Opco and any of
its Subsidiaries, PROVIDED, that no Event of Default or Potential Event of
Default results therefrom.
8.09. RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor
any of its Subsidiaries shall enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or Property, whether now or hereafter acquired, except for
(i) transactions permitted under SECTION 8.02, (ii) transactions permitted under
SECTION 8.16 of the Opco Credit Agreement and (iii) a merger of Recoil Holdings
and Recoil Australia Holdings, PROVIDED that such merger will not result in any
adverse tax consequences to Recoil Holdings, Recoil Australia Holdings, RCL or
the Lender.
8.10. SALES AND LEASEBACKS. Neither the Borrower nor any of its
Subsidiaries shall become liable, directly, by assumption or by Accommodation
Obligation, with respect to any lease,
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whether an Operating Lease or a Capital Lease, of any Property (whether real
or personal or mixed) (i) which it or one of its Subsidiaries sold or
transferred or is to sell or transfer to any other Person, or (ii) which it
or one of its Subsidiaries intends to use for substantially the same purposes
as any other Property which has been or is to be sold or transferred by it or
one of its Subsidiaries to any other Person in connection with such lease.
8.11. ERISA. The Borrower shall not:
(i) engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code for which a statutory or class exemption is
not available or a private exemption has not been previously obtained
from the Department of Labor;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue
Code), with respect to any Benefit Plan, whether or not waived;
(iii) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(iv) establish, maintain or otherwise become liable with respect
to, or permit any ERISA Affiliate to establish, maintain or otherwise
become liable with respect to, any Benefit Plan;
(v) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate is required
to make under any agreement relating to such Multiemployer Plan, or
any law pertaining thereto;
(vi) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412
of the Internal Revenue Code on or before the due date for such
installment or other payment;
(vii) amend, or permit any ERISA Affiliate to amend, a Benefit
Plan resulting in an increase in current liability for the plan year
such that the Borrower or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal Revenue
Code;
(viii) permit any unfunded liabilities with respect to any
Foreign Pension Plan; or
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(ix) fail, or permit any of its Subsidiaries or ERISA Affiliates
to fail, to pay any required contributions or payments to a Foreign
Pension Plan on or before the due date for such required installment
or payment.
8.12. ISSUANCE OF CAPITAL STOCK. Neither the Borrower nor any of its
Subsidiaries shall issue any Capital Stock to any Person except for (i) the
Capital Stock issued by such Persons as of the Amendment and Restatement
Effective Date and (ii) Common Stock issued by the Borrower upon conversion of
shares of Preferred Stock in accordance with the respective certificate of
designation for the Series A Preferred Stock and the Series B Preferred Stock.
8.13. ORGANIZATIONAL DOCUMENTS. Neither the Borrower nor any of its
Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective Organizational Documents as in effect on
the date hereof.
8.14. BANK ACCOUNTS. Neither the Borrower nor any of its
Subsidiaries shall open or maintain any deposit account with any Person unless
(i) such Person is a bank or financial institution reasonably acceptable to the
Lender, (ii) such Person has executed a Collection Account Agreement with
respect to such deposit account, and (iii) SCHEDULE 1.01.1 reflects (or shall
have been amended to reflect) such Person as a Collection Account Bank and such
deposit account as a Collection Account under this Agreement.
8.15. FISCAL YEAR. Neither the Borrower nor any of its consolidated
Subsidiaries shall change its Fiscal Year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
8.16. PAYMENT OF PIK DIVIDEND NOTES. The Borrower shall not make any
payment in respect of principal of the PIK Dividend Notes prior to the maturity
thereof, whether or not permitted by the PIK Dividend Note Agreement or
otherwise.
ARTICLE IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
9.01. CONSOLIDATED CASH FLOW. Consolidated Cash Flow, as determined
as of each date set out below for the 12-month period ending on such date, shall
not be less than the amount set out below opposite such date:
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DATE MINIMUM AMOUNT
---- --------------
June 30, 1996 $8,000,000
September 30, 1996 $8,000,000
December 31, 1996 $8,000,000
March 31, 1997 $9,000,000
June 30, 1997 $9,000,000
September 30, 1997 $9,000,000
December 31, 1997 $9,000,000
March 31, 1998 $10,000,000
June 30, 1998 $10,000,000
September 30, 1998 $10,000,000
December 31, 1998 $10,000,000
9.02. CONSOLIDATED INTEREST COVERAGE RATIO. The Consolidated
Interest Coverage Ratio, as determined as of each date set out below for the
12-month period ending on such date, shall not be less than the amount set out
below opposite such date:
DATE MINIMUM RATIO
---- -------------
June 30, 1996 2.50 to 1
September 30, 1996 2.50 to 1
December 31, 1996 2.75 to 1
March 31, 1997 2.75 to 1
June 30, 1997 2.75 to 1
September 30, 1997 2.75 to 1
December 31, 1997 2.75 to 1
March 31, 1998 3.00 to 1
June 30, 1998 3.00 to 1
September 30, 1998 3.00 to 1
December 31, 1998 3.00 to 1
9.03. CONSOLIDATED TOTAL FUNDED INDEBTEDNESS COVERAGE RATIO. The
Consolidated Total Funded Indebtedness Coverage Ratio, as determined as of each
date set out below for the 12-month period ending on such date, shall not be
greater than the ratio set out below opposite such date:
DATE MAXIMUM RATIO
---- -------------
June 30, 1996 4.5 to 1
September 30, 1996 4.5 to 1
December 31, 1996 3.5 to 1
March 31, 1997 3.5 to 1
June 30, 1997 3.5 to 1
September 30, 1997 3.5 to 1
December 31, 1997 3.5 to 1
March 31, 1998 3.5 to 1
June 30, 1998 3.5 to 1
September 30, 1998 3.5 to 1
December 31, 1998 3.5 to 1
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ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall fail to
pay when due any of the Obligations.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under SECTIONS 6.07, 7.01, and 7.06, ARTICLE VIII or ARTICLE IX.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Borrower to the Lender herein or by the
Borrower or any of its Subsidiaries in any of the other Loan Documents or in any
statement or certificate at any time given by any such Person pursuant to any of
the Loan Documents shall be false or misleading in any material respect on the
date as of which made (or deemed made).
(d) OTHER DEFAULTS. The Borrower shall default in the performance of
or compliance with any term contained in this Agreement (other than as covered
by PARAGRAPHS (a), (b) or (c) of this SECTION 10.01) or any default or event of
default shall occur under any of the other Loan Documents, and such default or
event of default shall continue for fifteen (15) days after the Borrower has
knowledge of the default or, if earlier, receipt by the Borrower of a notice of
the default from the Lender.
(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES; OTHER
AGREEMENTS. The Borrower or any of its Subsidiaries shall fail to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (other than
an Obligation) having a principal amount in excess of $100,000; or any breach,
default or event of default shall occur, or any other condition shall exist
under any instrument, agreement or indenture pertaining to any such
Indebtedness; or any such Indebtedness shall be otherwise declared to be due and
payable (by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by the Borrower or any of its Subsidiaries (other than by
a regularly scheduled required prepayment) prior to the stated maturity thereof;
or any "Event of Default" under (and as defined in) the RCL Loan Agreement, the
Opco Credit Agreement or the PIK Dividend Note Agreement has occurred and is
continuing.
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(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Borrower or
any of its Subsidiaries and the petition shall not be dismissed, stayed, bonded
or discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Borrower or any of its Subsidiaries in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law; or the board of directors of the Borrower
or any of its Subsidiaries (or any committee thereof) adopts any resolution or
otherwise authorizes any action to approve any of the foregoing.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over the Borrower or any of its
Subsidiaries or over all or a substantial part of the Property of the Borrower
or any of its Subsidiaries shall be entered; or an interim receiver, trustee or
other custodian of the Borrower or any of its Subsidiaries or of all or a
substantial part of the Property of the Borrower or any of its Subsidiaries
shall be appointed or a warrant of attachment, execution or similar process
against any substantial part of the Property of the Borrower or any of its
Subsidiaries shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days after entry, appointment or
issuance; or the board of directors of the Borrower or any of its Subsidiaries
(or any committee thereof) adopts any resolution or otherwise authorizes any
action to approve any of the foregoing.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower
or any of its Subsidiaries of the Borrower shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
Property; or the Borrower or any of its Subsidiaries of the Borrower shall make
any assignment for the benefit of creditors or shall be unable or fail, or admit
in writing its inability, to pay its debts as such debts become due.
(h) JUDGMENTS AND ATTACHMENTS. Any money judgment (other than a
money judgment covered by insurance as to which the insurance company has
acknowledged coverage), writ or warrant of attachment, or similar process
against the Borrower or any of its Subsidiaries of the Borrower or any of their
respective assets
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involving in any case an amount in excess of $500,000 is entered and shall
remain undischarged, unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered
against the Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of sixty (60) days; or the Borrower or any of its
Subsidiaries shall otherwise dissolve or cease to exist except as specifically
permitted by this Agreement.
(j) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any
reason, (i) any Loan Document ceases to be in full force and effect or the
Borrower or any of its Subsidiaries party thereto seeks to repudiate its
obligations thereunder and the Liens intended to be created thereby are, or the
Borrower or any such Subsidiary seeks to render such Liens, invalid and
unperfected, or (ii) Liens in favor of the Lender contemplated by the Loan
Documents shall, at any time, for any reason, be invalidated or otherwise cease
to be in full force and effect, or such Liens shall be subordinated or shall not
have the priority contemplated by this Agreement or the Loan Documents.
(k) TERMINATION EVENT. Any Termination Event occurs which the Lender
believes could reasonably be expected to subject either the Borrower or any
ERISA Affiliate to liability in excess of $250,000.
(l) WAIVER APPLICATION. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Lender believes
that the substantial business hardship upon which the application for the waiver
is based could subject either the Borrower or any ERISA Affiliate to liability
in excess of $250,000.
(m) SUSPENSIONS, DEBARMENT. Any suspension or debarment with respect
to Government Contracts is imposed on the Borrower, any of its Subsidiaries or
any of their respective directors, officers, employees, consultants or agents.
(n) MATERIAL ADVERSE CHANGE. An event shall exist which has a
Material Adverse Effect.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with SECTION 11.05.
10.02. RIGHTS AND REMEDIES.
(a) ACCELERATION AND TERMINATION. Upon the occurrence of any
Event of Default described in SECTIONS 10.01(f) or 10.01(g), the unpaid
principal amount of, and any and all accrued
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interest on, the Obligations and all accrued fees shall automatically become
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or
accelerate and of acceleration), all of which are hereby expressly waived by
the Borrower; and upon the occurrence and during the continuance of any other
Event of Default, the Lender may, by written notice to the Borrower, declare
the unpaid principal amount of and any and all accrued and unpaid interest on
the Obligations to be, and the same shall thereupon be, immediately due and
payable, without presentment, demand, or protest or other requirements of any
kind (including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and of acceleration),
all of which are hereby expressly waived by the Borrower.
(b) DEFAULT RATE OF INTEREST. In addition to any other remedies
available to the Lender after the occurrence of an Event of Default, the Lender
shall be entitled to receive interest on the Obligations at the default rate in
accordance with SECTION 2.02(c).
(c) ENFORCEMENT. The Borrower acknowledges that in the event the
Borrower or any of its Subsidiaries fails to perform, observe or discharge any
of their respective obligations or liabilities under this Agreement or any other
Loan Document, any remedy of law may prove to be inadequate relief to the
Lender; therefore, the Borrower agrees that the Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
ARTICLE XI
MISCELLANEOUS
11.01. EXPENSES. The Borrower agrees upon demand to pay, or
reimburse the Lender for, all of the Lender's reasonable internal and external
audit, legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket costs
and expenses of every type and nature (including, without limitation, the
reasonable fees, expenses and disbursements of Sidley & Austin, local and
foreign legal counsel, auditors, accountants, appraisers, printers, insurance
and environmental advisers, and other consultants and agents) incurred by the
Lender in connection with (a) the preparation, negotiation and execution of this
Agreement and the Loan Documents and any amendments, consents, waivers,
assignments, restatements, or supplements to any of the same; (b) the Lender's
periodic audits of the Borrower and its Subsidiaries after the Initial Closing
Date; (c) the protection of the Liens under the Loan Documents after the Initial
Closing Date (including, without limitation, any reasonable fees and expenses
for local counsel in various jurisdictions); (d) the ongoing
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administration of this Agreement and the Term Loans, including consultation
with attorneys in connection therewith and with respect to the Lender's
rights and responsibilities under this Agreement and the other Loan
Documents; (e) the protection, collection or enforcement of any of the
Obligations or Loan Documents or any security therefor or exercising or
enforcing any other right or remedy available to the Lender under the Loan
Documents; (f) the commencement, defense or intervention in any court
proceeding relating in any way to the Obligations, the Property, the
Borrower, any of its Subsidiaries, this Agreement or any of the other
Transaction Documents; (g) the response to, and preparation for, any subpoena
or request for document production with which the Lender is served or
deposition or other proceeding in which the Lender is called to testify, in
each case, relating in any way to the Obligations, the Property, the
Borrower, any of its Subsidiaries, this Agreement or any of the other
Transaction Documents; (h) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding; (i) in
taking any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise) described in CLAUSES (e) through (h) above.
11.02. INDEMNITY. The Borrower further agrees to defend, protect,
indemnify, and hold harmless the Lender and each of its officers, directors,
employees, attorneys and agents (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in ARTICLE IV) (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses (other than loss of
profits), damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (excluding any taxes and
including, without limitation, the fees and disbursements of counsel or
consulting firms for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), imposed on, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of (a) this Agreement or
the other Loan Documents, or any act, event or transaction related or attendant
thereto or to the Purchase, the Recoil Acquisition, the making of the Term
Loans, the management of the Term Loans, the use or intended use of the proceeds
of the Term Loans, or any of the other transactions contemplated by the
Transaction Documents, or (b) any Liabilities and Costs under Environmental Laws
arising from or in connection with the past, present or future operations of the
Borrower, its Subsidiaries or any of their respective predecessors in interest,
or, the past, present or future environmental condition of any Property, the
presence of asbestos-containing materials at any Property or the Release or
threatened Release of any Contaminant (collectively, the "Indemnified Matters");
PROVIDED, HOWEVER, that the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters to the extent caused by or
resulting from
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the willful misconduct or gross negligence of the Indemnitee (or any other
Indemnitee whose willful misconduct or grossly negligent acts were authorized
by the Indemnitee claiming indemnification hereunder), as determined by a
court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees.
11.03. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the
accounting principles used in the preparation of the most recent financial
statements referred to in SECTION 6.01 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions) and
are adopted by the Borrower with the agreement of its independent certified
public accountants and such changes result in a change in the method of
calculation of any of the covenants, standards or terms found in ARTICLE VIII
and ARTICLE IX, the parties hereto agree to enter into negotiations in order
to amend such provisions so as to equitably reflect such changes with the
desired result that the criteria for evaluating compliance with such
covenants, standards and terms by the Borrower shall be the same after such
changes as if such changes had not been made; PROVIDED, HOWEVER, that no
change in GAAP that would affect the method of calculation of any of the
covenants, standards or terms shall be given effect in such calculations
until such provisions are amended, in a manner satisfactory to the Lender and
the Borrower, to so reflect such change in accounting principles.
11.04. SETOFF. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, the Lender is
hereby authorized by the Borrower at any time or from time to time, without
notice to any Person (any such notice being hereby expressly waived) to set off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured (but not including trust accounts)) and
any other Indebtedness at any time held or owing by the Lender to or for the
credit or the account of the Borrower against and on account of the Obligations
of the Borrower to the Lender, including, but not limited to, the Term Loans and
all claims of any nature or description arising out of or in connection with
this Agreement, irrespective of whether or not (a) the Lender shall have made
any demand hereunder or (b) the Lender shall have declared the principal of and
interest on the Term Loans and other amounts due hereunder to be due and payable
as permitted by ARTICLE X and even though such Obligations may be contingent or
unmatured.
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11.05. AMENDMENTS AND WAIVERS. Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement
shall be effective without the written agreement of the Lender and the
Borrower, and no termination or waiver of any provision of this Agreement, or
consent to any departure by the Borrower therefrom, shall be effective
without the written concurrence of the Lender, which the Lender shall have
the right to grant or withhold in its sole discretion. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
11.06. NOTICES. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given
shall be in writing and may be personally served, telecopied, telexed or sent
by courier service or United States certified mail and shall be deemed to
have been given when delivered in person or by courier service, upon receipt
of a telecopy or telex or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. For the purposes
hereof, the addresses of the parties hereto (until notice of a change thereof
is delivered as provided in this SECTION 11.06) shall be as follows:
(a) If to the Lender, at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Murry Stegelmann
Telecopier No. (203) 316-7894
with copies to:
201 High Ridge Road
Stamford, CT 06927
Attention: Corporate Finance Group
Department Counsel
Telecopier No. (203) 316-7889
and
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: Edward D. Eddy, III, Esq.
Telecopier No. (213) 896-6600
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(b) If to the Borrower, at:
Kaynar Holdings Inc.
800 South State College Blvd.
Fullerton, California 92634-3001
Attention: David A. Werner
Telecopier No. (714) 680-3153
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attn: C. James Levin, Esq.
Telecopier No. (213) 669-6407
PROVIDED, that the Lender or the Borrower shall have the right to change any
of the above-listed addresses by properly addressed and delivered notice to
the other party.
11.07. SURVIVAL OF WARRANTIES AND AGREEMENTS. All representations
and warranties made herein and all obligations of the Borrower in respect of
taxes, indemnification and expense reimbursement shall survive the execution
and delivery of this Agreement and the other Loan Documents, the making and
repayment of the Term Loans and the termination of this Agreement and shall
not be limited in any way by the passage of time or occurrence of any event
and shall expressly cover time periods when the Lender may have come into
possession or control of any of the Borrower's or its Subsidiaries' Property.
11.08. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of the Lender in the exercise of any power,
right or privilege under any of the Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under
the Loan Documents are cumulative to and not exclusive of any rights or
remedies otherwise available.
11.09. MARSHALLING; PAYMENTS SET ASIDE. The Lender shall be under
no obligation to marshall any assets in favor of the Borrower or any other
party or against or in payment of any or all of the Obligations. To the
extent that the Borrower makes a payment or payments to the Lender or the
Lender receives payment from the proceeds of the Collateral or exercises its
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens,
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right and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
11.10. SEVERABILITY. In case any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
11.11. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement or be given any substantive effect.
11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
11.13. LIMITATION OF LIABILITY. No claim may be made by the
Borrower or the Lender or any other Person against the Borrower, the Lender
or the Affiliates, directors, officers, employees, attorneys or agents of any
of them for any special, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of
or related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and the Borrower and the
Lender hereby waive, release and agree not to sue upon any such claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.
11.14. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto
and the successors and permitted assigns of the Lender. The Lender may
assign all or any part of its rights and obligations under this Agreement and
the other Loan Documents to any Person upon thirty (30) days' prior written
notice to (but without the consent of) the Borrower, it being agreed and
understood that the Lender's right to assign its interests under this
Agreement and the other Loan Documents shall be independent of any right of
assignment in favor of the Lender with respect to any other agreement,
document or instrument to which it is a party. The rights hereunder of the
Borrower, or any interest therein, may not be assigned without the written
consent of the Lender.
11.15. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.
(a) PERSONAL JURISDICTION. (i) THE LENDER AND THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY CALIFORNIA
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STATE COURT OR FEDERAL COURT SITTING IN LOS ANGELES, CALIFORNIA, AND ANY
COURT HAVING JURISDICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN
ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO
THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE BORROWER IRREVOCABLY
DESIGNATES AND APPOINTS CT CORPORATION AS ITS AGENT (THE "PROCESS AGENT") FOR
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE
BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. THE LENDER AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION WHICH
IS NECESSARY OR DESIRABLE TO ENABLE THE LENDER TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE LENDER. THE BORROWER AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE
LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
LENDER. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN WHICH THE LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS
SECTION.
(b) SERVICE OF PROCESS. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS
SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT.
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11.16. COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This
Agreement and any amendments, waivers, consents, or supplements hereto may be
executed in counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. This Agreement shall become effective
against the Borrower and the Lender as of the date when all of the conditions
set forth in Section 4.01 have been satisfied or duly waived in accordance
with Section 11.05 (the "Amendment and Restatement Effective Date"). Subject
to the provisions of this Agreement (including, without limitation, the
preliminary statements hereto), this Agreement and each of the other Loan
Documents shall be construed to the extent reasonable to be consistent one
with the other, but to the extent that the terms and conditions of this
Agreement are actually inconsistent with the terms and conditions of any
other Loan Document, this Agreement shall govern.
11.17. CONFIDENTIALITY. The Lender shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement and
identified as such by the Borrower in accordance with the Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide offeree, transferee or
participant in connection with the contemplated transfer or participation or
as required or requested by any Governmental Authority or representative
thereof or pursuant to legal process and shall require any such offeree,
transferee or participant to agree (and require any of its offerees,
transferees or participants to agree) to comply with this SECTION 11.17. In
no event shall the Lender be obligated or required to return any materials
furnished by the Borrower; PROVIDED, HOWEVER, that each offeree shall be
required to agree that if it does not become a transferee or participant it
shall return all materials furnished to it by the Borrower in connection with
this Agreement. Any and all confidentiality agreements entered into between
the Lender and the Borrower shall survive the execution of this Agreement.
11.18. NO NOVATION. This Agreement is an amendment and
restatement of the Existing Credit Agreement. The parties hereto hereby
acknowledge and agree that (a) the "Term Note" (as defined in the Existing
Credit Agreement) is the same instrument as the Initial Term Note referred to
in this Agreement and (b) this Agreement and the delivery of the Supplemental
Term Note pursuant hereto are in no way intended to constitute a novation of
the Existing Credit Agreement or the Initial Term Note or the outstanding
principal amount of the Indebtedness evidenced by either of them.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
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11.19. ENTIRE AGREEMENT. This Agreement, taken together with all
of the other Loan Documents, embodies the entire agreement and understanding
among the parties hereto and all prior agreements and understandings, written
and oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWER: KAYNAR HOLDINGS INC.
By /s/ D.A. Werner
----------------------------
Name: David A. Werner
Title: Vice President
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ P.C. Keenoy
----------------------------
Name: Peter C. Keenoy
Title: Managing Director
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Exh. 10.2
[EXECUTION COPY]
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 12, 1996
between
KAYNAR TECHNOLOGIES INC.,
as Borrower
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
================================================================================
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TABLE OF CONTENTS
Section Page
------- ----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . 2
1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . . 29
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . 30
1.04. References to this Agreement . . . . . . . . . . . . . . . . . . 30
1.05. Miscellaneous Terms. . . . . . . . . . . . . . . . . . . . . . . 30
1.06. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.02. Revolving Credit Facility. . . . . . . . . . . . . . . . . . . . 32
2.03. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 34
2.04. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
2.05. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
2.06. Authorized Officers and Agents . . . . . . . . . . . . . . . . . 40
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Commitments . . . . . . . . . . . . . 40
3.02. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.03. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.04. Promise to Repay; Evidence of Indebtedness . . . . . . . . . . . 46
ARTICLE IV
CONDITIONS TO LOANS
4.01. Conditions Precedent to Amendment and Restatement
Effective Date Loans and Letters of Credit . . . . . . . . . . . 47
4.02. Conditions Precedent to All Subsequent Revolving Loans and
Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties . . . . . . . . . . . . . . . . . 51
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ARTICLE VI
REPORTING COVENANTS
6.01. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 64
6.02. Operations Reports . . . . . . . . . . . . . . . . . . . . . . . 67
6.03. Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . 68
6.04. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 69
6.05. Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.06. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.07. ERISA Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.08. Environmental Notices. . . . . . . . . . . . . . . . . . . . . . 72
6.09. Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.10. Government Contract Notices. . . . . . . . . . . . . . . . . . . 73
6.11. Other Information. . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01. Organizational Existence, Etc. . . . . . . . . . . . . . . . . . 74
7.02. Organizational Powers; Conduct of Business . . . . . . . . . . . 74
7.03. Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . 74
7.04. Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 75
7.05. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.06. Inspection of Property; Books and Records;
Discussions. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
7.07. Insurance and Condemnation Proceeds. . . . . . . . . . . . . . . 76
7.08. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . 77
7.09. Foreign Employee Benefit Plan Compliance . . . . . . . . . . . . 77
7.10. Government Contract Compliance . . . . . . . . . . . . . . . . . 77
7.11. Maintenance of Property. . . . . . . . . . . . . . . . . . . . . 77
7.12. Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.13. Future Liens on Real Property. . . . . . . . . . . . . . . . . . 78
ARTICLE VIII
NEGATIVE COVENANTS
8.01. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.02. Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . . 79
8.03. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.04. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.05. Accommodation Obligations. . . . . . . . . . . . . . . . . . . . 82
8.06. Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 82
8.07. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . 83
8.08. Transactions with Shareholders and Affiliates. . . . . . . . . . 83
8.09. Restriction on Fundamental Changes . . . . . . . . . . . . . . . 84
8.10. Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . 84
8.11. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.12. Issuance of Capital Stock. . . . . . . . . . . . . . . . . . . . 85
8.13. Organizational Documents . . . . . . . . . . . . . . . . . . . . 85
8.14. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 85
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8.15. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . 86
8.16. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE IX
FINANCIAL COVENANTS
9.01. Consolidated Cash Flow . . . . . . . . . . . . . . . . . . . . . 87
9.02. Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . 87
9.03. Consolidated Total Funded Indebtedness Coverage Ratio. . . . . . 87
9.04. Net Working Capital to Senior Indebtedness Ratio . . . . . . . . 88
9.05. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 89
10.02. Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . 92
ARTICLE XI
MISCELLANEOUS
11.01. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
11.02. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
11.03. Change in Accounting Principles . . . . . . . . . . . . . . . . 94
11.04. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
11.05. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 95
11.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
11.07. Survival of Warranties and Agreements . . . . . . . . . . . . . 96
11.08. Failure or Indulgence Not Waiver; Remedies
Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.09. Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . 97
11.10. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.11. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.12. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 97
11.13. Limitation of Liability . . . . . . . . . . . . . . . . . . . . 97
11.14. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 98
11.15. Certain Consents and Waivers of the Borrower. . . . . . . . . . 98
11.16. Counterparts; Effectiveness; Inconsistencies. . . . . . . . . . 99
11.17. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 100
11.18. No Novation . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.19. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 101
-iii-
<PAGE>
EXHIBITS
--------
Exhibit A -- Form of Borrowing Base Certificate
Exhibit B-1 -- Form of Charge Over Shares
Exhibit B-2 -- Form of Supplement to Charge Over Shares
Exhibit C -- Form of Collection Account Agreement
Exhibit D-1 -- Form of Patent Security Agreement
Exhibit D-2 -- Form of Supplemental Patent Security Agreement
Exhibit D-3 -- Form of Supplement to Patent Security Agreements
Exhibit E -- Form of Pledge Agreement
Exhibit F -- Form of Notice of Borrowing
Exhibit G-1 -- Form of Security Agreement
Exhibit G-2 -- Form of Amendment and Supplement to Security Agreement
Exhibit H-1 -- Form of Trademark Security Agreement
Exhibit H-2 -- Form of Supplemental Trademark Security Agreement
Exhibit H-3 -- Form of Amendment and Supplement to Trademark Security
Agreements
Exhibit I -- Form of Term Note
Exhibit J -- Form of Revolving Credit Note
Exhibit K -- Form of Officer's Certificate to Accompany Reports
SCHEDULES
---------
Schedule 1.01.1 -- Collection Accounts and
Collection Account Banks
Schedule 1.01.2 -- Permitted Existing Accommodation
Obligations
Schedule 1.01.3 -- Permitted Existing Indebtedness
Schedule 1.01.4 -- Permitted Existing Liens
Schedule 5.01-C -- Consents
Schedule 5.01-D -- Authorized, Issued and Outstanding Capital
Stock; Subsidiaries
Schedule 5.01-O -- Pending Actions
Schedule 5.01-T -- Environmental Matters
Schedule 5.01-U -- ERISA Matters
Schedule 5.01-W -- Labor Contracts
Schedule 5.01-X -- Insurance Policies
Schedule 5.01-Y -- Government Contract Matters
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<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement dated as of August 12, 1996
(as further amended, restated, supplemented or modified from time to time, the
"Agreement") is entered into by and between Kaynar Technologies Inc., a Delaware
corporation (the "Borrower"), and General Electric Capital Corporation, a New
York corporation (the "Lender").
PRELIMINARY STATEMENTS
WHEREAS, the Borrower and the Lender entered into the Credit Agreement
dated as of January 3, 1994 (the "Original Credit Agreement");
WHEREAS, the Original Credit Agreement has been amended by the First
Amendment dated as of December 15, 1994 (the "First Amendment"), the Second
Amendment dated as of May 30, 1995, and the Third Amendment dated as of August
4, 1995 (the "Third Amendment" and, collectively, the "Original Amendments"; and
the Original Credit Agreement, as amended by the Original Amendments, the
"Existing Credit Agreement"); and
WHEREAS, the Borrower and the Lender desire to amend and restate the
Existing Credit Agreement in its entirety to give effect to the terms and
provisions set forth in this Agreement, it being understood and agreed that (i)
with respect to any date or time period occurring and ending prior to the
Amendment and Restatement Effective Date (as defined below), the rights and
obligations of the parties thereto shall be governed by the provisions of the
Existing Credit Agreement (including, without limitation, the Exhibits and
Schedules thereto) which for such purposes shall remain in full force and
effect, (ii) with respect to any date or time period occurring or ending on or
after the Amendment and Restatement Effective Date, the rights and obligations
of the parties hereto shall be governed by this Agreement (including, without
limitation, the Exhibits and Schedules hereto) and (iii) it is the intent of the
Borrower and Lender that Lender shall remain a beneficiary under each Loan
Document executed on or before the date hereof pursuant to which the Borrower
granted a Lien to Lender in any of Borrower's Property and that all of the
Obligations shall be secured by the Liens on the Property subject to such Loan
Documents, as well as the Liens granted to Lender on all other Collateral on and
after the date hereof.
NOW, THEREFORE, in consideration of the premises, agreements,
covenants, representations and warranties herein contained, and for good and
valuable consideration, the receipt of which is hereby acknowledged, the
Borrower and the Lender agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.01. CERTAIN DEFINED TERMS. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"ACCOMMODATION OBLIGATION" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof by
the Person incurring the Accommodation Obligation is to provide assurance to the
obligee of such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of business), notes co-
made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
discharge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received. The amount of any Accommodation Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported; PROVIDED, that
(i) if the liability of the Person extending such guaranty or support is limited
with respect thereto to an amount less than the obligation guaranteed or
supported, or is limited to recourse against a particular asset or assets of
such Person, the amount of the corresponding Accommodation Obligation shall be
limited (in the case of a guaranty or other support limited by amount) to such
lesser amount or (in the case of a guaranty or other support limited by recourse
to a particular asset or assets) to the higher of the Fair Market Value of such
asset or assets at the date for determination of the amount of the Accommodation
Obligation or the value at which such asset or assets would, in conformity with
GAAP, be reflected on or valued for the purposes of preparing a consolidated
balance sheet of such Person as at such determination date; and (ii) if any
obligation is guaranteed or otherwise supported jointly and severally by a
Person and others, then the amount of the liability of such Person with respect
to such guaranty or other support to be included in the amount of such Person's
Accommodation Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"ACCOUNTS" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) accounts, (ii) contract rights, chattel paper,
instruments, documents, deposit accounts (including, without limitation, the
Collection Accounts of the Borrower and the "Collection Accounts" under (and as
defined in) the RCL Loan Agreement), and other rights to payment
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<PAGE>
of any kind, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and whether or not earned by
performance, (iii) any of the foregoing which are not evidenced by
instruments or chattel paper, (iv) intercompany receivables, and any security
documents executed in connection therewith, (v) proceeds of any letters of
credit or insurance policies on which the Borrower or any of its Subsidiaries
is named as beneficiary, (vi) claims against third parties for advances and
other financial accommodations and any other obligations whatsoever owing to
the Borrower or any of its Subsidiaries, (vii) rights in and to all security
agreements, leases, guarantees, instruments, securities, documents of title
and other contracts securing, evidencing, supporting or otherwise relating to
any of the foregoing, together with all rights in any goods, merchandise or
Inventory which any of the foregoing may represent, and (viii) rights in
returned and repossessed goods, merchandise and Inventory which any of the
same may represent, including, without limitation, any right of stoppage in
transit.
"ACCOUNT DEBTOR" means any person who is or who may become obligated
to the Borrower under, with respect to, or on account of an Account or a General
Intangible.
"AFFILIATE" means any Person (other than Lender) which directly or
indirectly owns or controls, on an aggregate basis, including all beneficial
ownership and ownership or control as a trustee, guardian or other fiduciary, at
least ten percent (10%) of the outstanding capital stock (or other ownership
interests) having ordinary voting power to elect a majority of the board of
directors or otherwise to direct or cause the direction of the management and
policies (irrespective of whether, at the time, stock (or other ownership
interest) of any other class or classes of such Person shall have or might have
voting power by reason of the happening of any contingency) of the Borrower or
any Subsidiary of the Borrower which is controlled by or is under common control
with the Borrower or any stockholders (or other owners) of the Borrower, or any
Subsidiary. For the purpose of this definition, "control" means the possession,
directly or indirectly, of the power to direct or to cause the direction of
management and policies, whether through the ownership of voting securities, by
contract or otherwise.
"AFS" means the Aerospace Fastening Systems Group of Microdot.
"AFS PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as
of November 3, 1993 by and between the Borrower and Microdot, pursuant to which
Microdot agrees to sell, and the Borrower agrees to purchase substantially all
of the assets of AFS.
"AGREEMENT" is defined in the preamble hereto.
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<PAGE>
"AMENDMENT AND RESTATEMENT EFFECTIVE DATE" is defined in SECTION
11.16.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Sections 101 ET SEQ.), as amended from time to time, and any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Central District of California, Santa Ana Division.
"BENEFIT PLAN" means a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) subject to Title IV of ERISA
(i) in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign Employee
Benefit Plan.
"BORROWER" is defined in the preamble hereto.
"BORROWING" means a borrowing consisting of Loans of the same type
made on the same day.
"BORROWING BASE" at any time means the lesser of (a) the Revolving
Credit Commitment at that time and (b) an amount equal to 85% of Eligible
Accounts LESS reserves as the Lender may deem necessary or appropriate in its
reasonable credit judgment.
"BORROWING BASE CERTIFICATE" means a certificate of the chief
financial officer of the Company in substantially the form of EXHIBIT A attached
hereto and made a part hereof and appropriately completed.
"BUSINESS ACTIVITY REPORT" means (i) a Notice of Business Activities
Report from the State of New Jersey Division of Taxation, or (ii) a Minnesota
Business Activity Report from the Minnesota Department of Revenue.
"BUSINESS DAY" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close in Los Angeles,
California, Chicago, Illinois or New York, New York.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity with
GAAP, are required to be included in or reflected by the Parent's or any of its
Subsidiaries' fixed asset accounts as reflected in any of their respective
balance sheets; PROVIDED, HOWEVER, that Capital Expenditures shall include,
whether or not such a designation would be in conformity with GAAP, (i) that
portion of Capital Leases which is capitalized on the consolidated balance sheet
of
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<PAGE>
the Parent and its Subsidiaries and (ii) expenditures for Equipment which is
purchased simultaneously with the trade-in of existing Equipment owned by the
Parent or any of its Subsidiaries, to the extent the gross purchase price of the
purchased Equipment exceeds the book value of the Equipment being traded in at
such time.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CAPITAL STOCK", with respect to any Person, means any shares, capital
stock, stock units or units in the capital of such Person, regardless of class
or designation, and all warrants, options, purchase rights, conversion or
exchange rights, voting rights, calls or claims of any character with respect
thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; and (ii) domestic and
eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations), which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or Prime-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED, that the maturities of such Cash Equivalents
shall not exceed one year.
"CASH FLOW" means, for any Person for any period, the amounts for such
period (taken as a single accounting period determined in conformity with GAAP)
of such Person's (i) net income or loss determined on a first-in-first-out
method of inventory accounting basis, PLUS (ii) depreciation and amortization
expense, PLUS (iii) interest expense, PLUS (iv) foreign, federal and state
income taxes, PLUS (v) state sales taxes arising in connection with the
Purchase, to the extent included in the calculation of net income (or loss),
PLUS (vi) extraordinary losses, PLUS (vii) Liabilities and Costs incurred in
connection with any Remedial Action, to the extent included in the calculation
of net income (or loss), PLUS (viii) Transaction Costs, MINUS (ix) extraordinary
gains.
"CHARGE OVER SHARES" means that certain Charge Over Shares dated
January 3, 1994, in the form of EXHIBIT B-1 attached hereto and made a part
hereof, executed by the Borrower in favor of the Lender, pursuant to which the
Borrower pledges and grants a security interest to the Lender in 65% of the
issued and outstanding Capital Stock of Kaynar U.K. and related Property, as
supplemented by the Supplement to Charge Over Shares of even date
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<PAGE>
herewith, in substantially the form of EXHIBIT B-2 attached hereto and made a
part hereof, as the same may be further amended, restated, supplemented or
modified from time to time.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ., any amendments
thereto, any successor statutes, and any regulations or guidance promulgated
thereunder.
"CLAIM" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"COLLATERAL" means all Property and interests in Property now owned or
hereafter acquired by the Borrower or any of its Subsidiaries upon which a Lien
is granted under any of the Loan Documents.
"COLLECTION ACCOUNT" means (i) each deposit account of the Borrower
identified on SCHEDULE 1.01.1 (except for disbursement accounts into which no
funds are deposited other than (a) proceeds of Revolving Loans or (b) transfers
from other disbursement accounts into which only proceeds of Revolving Loans are
deposited) and (ii) each deposit account of the Lender into which collections in
respect of Accounts and other proceeds of Collateral are deposited.
"COLLECTION ACCOUNT AGREEMENT" means, with respect to each Collection
Account of the Borrower, an agreement in substantially the form of EXHIBIT C
attached hereto and made a part hereof (or such other form as may be agreed to
by the Borrower and the Lender), pursuant to which, among other things (i) the
Collection Account Bank party thereto agrees to remit to the Lender or its
designee in accordance with instructions contained therein, on a daily basis and
by wire transfer or through an automated clearing house, all collected funds on
deposit in the Collection Account(s) maintained by such Collection Account Bank
(which agreement may not be revoked, and shall remain in effect, until sixty
(60) days after such Collection Account Bank mails to the Lender and the
Borrower a notice of termination), and (ii) the Borrower (or its applicable
Subsidiary) and the Collection Account Bank confirm the Lender's perfected first
priority liens in the Collection Accounts subject thereto.
"COLLECTION ACCOUNT BANK" means each bank, trust company or other
financial institution (i) identified on SCHEDULE 1.01.1 at which the Borrower or
any of its Subsidiaries maintains one or more Collection Accounts or (ii) at
which the Lender maintains one or more Collection Accounts.
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<PAGE>
"COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"COMMITMENTS" means the Term Loan Commitment and the Revolving Credit
Commitment.
"COMPLIANCE CERTIFICATE" is defined in SECTION 6.01(d).
"CONCENTRATION ACCOUNT" means account no. 50199839 maintained by the
Lender at Bankers Trust Company in New York, New York, ABA # 02100103-3.
"CONSOLIDATED CASH FLOW" means, for any period, the Cash Flow for such
period (taken as a single accounting period determined in conformity with GAAP)
of the Borrower and its Subsidiaries determined on a consolidated basis.
"CONSOLIDATED INTEREST CHARGES" means, for any period, the amount for
such period (taken as a single accounting period determined in conformity with
GAAP) of total interest expense, paid in cash (including the interest component
of Capital Leases), of the Borrower and its Subsidiaries on a consolidated
basis.
"CONSOLIDATED INTEREST COVERAGE RATIO" means, for any period, the
ratio of (i) Consolidated Cash Flow for such period to (ii) Consolidated
Interest Charges for such period.
"CONSOLIDATED TOTAL FUNDED INDEBTEDNESS" means, as of any date of
determination, the amount (determined in conformity with GAAP) of (i) Letter of
Credit Obligations and Indebtedness evidenced by the Notes, PLUS (ii) all other
outstanding Indebtedness of the Borrower and its Subsidiaries, determined on a
consolidated basis, which matures more than one year from the date such
Indebtedness was incurred, created or assumed by any of such Persons, or matures
within one year from such date but is renewable or extendible, at the option of
the debtor, to a date more than one year from such date, PLUS (iii) all other
outstanding Indebtedness of the Borrower and its Subsidiaries which arises under
a revolving credit or similar agreement which obligates the lender or lenders to
extend credit during a period of more than one year from such date, MINUS (iv)
any Indebtedness owing by the Borrower or any of its Subsidiaries to any other
of such Persons.
"CONSOLIDATED TOTAL FUNDED INDEBTEDNESS COVERAGE RATIO" means, as of
any date of determination, the ratio of (i) Consolidated Total Funded
Indebtedness as such date to (ii) Consolidated Cash Flow for any period ending
on such date.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, extremely hazardous waste, special waste, petroleum
or petroleum-derived substance or waste, asbestos, PCBs, or any constituent of
any such substance
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or waste, and includes, but is not limited to, these terms as defined in any
Environmental Law, as well as any other substance which is required by any
Governmental Authority to be investigated, cleaned up, removed, treated or
otherwise abated or which is regulated by such Governmental Authority.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"CUSTOMARY PERMITTED LIENS" means
(i) Liens (other than Environmental Liens and Liens in favor of
the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP;
(iii) Liens (other than Environmental Liens and Liens in favor
of the PBGC) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety and performance bonds; PROVIDED,
that (A) all such Liens do not in the aggregate materially detract
from the value of the Borrower's or any of it Subsidiaries' assets or
Property or materially impair the use thereof in the operation of
their respective businesses, and (B) all such Liens in connection with
worker's compensation, unemployment insurance or other types of social
security benefits deposits shall secure obligations in an aggregate
principal amount not exceeding $50,000 at any time outstanding; and
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations,
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<PAGE>
covenants, rights-of-way, utility easements, building restrictions and
other similar charges or encumbrances on the use of Real Property which
do not interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries.
"DESIGNATED PREPAYMENT" is defined in SECTION 3.01(b)(v).
"DOD" means the United States Department of Defense, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOL" means the United States Department of Labor, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOLLARS" and "$" mean the lawful money of the United States.
"ELIGIBLE ACCOUNTS" means those Accounts created by the Borrower in
the ordinary course of business that arise out of the Borrower's sale of goods
or rendition of services, that strictly comply with all of the Borrower's
representations and warranties to the Lender with respect to Accounts, and that
are and at all times shall continue to be acceptable to the Lender in all
respects, PROVIDED, HOWEVER, that standards of eligibility may be fixed and
revised from time to time by the Lender in its reasonable credit judgment.
Without limiting the foregoing, the Lender does not CURRENTLY intend to treat
the following as Eligible Accounts:
(i) Accounts which the Account Debtor has failed to pay within ninety
(90) days of invoice date;
(ii) Accounts with selling terms of more than sixty (60) days;
(iii) Accounts with respect to which the Account Debtor is an officer,
employee, Affiliate or agent of the Borrower;
(iv) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other
terms by reason of which the payment by the Account Debtor may be
conditional;
(v) Accounts with respect to which the Account Debtor is not a
resident of the United States, and which are not either (i) covered by
credit insurance in form and amount, and by an insurer, satisfactory to the
Lender, or (ii) supported by one or more letters of credit that are
assignable and have been delivered to the Lender in form, substance, amount
and of a tenor, and issued by a financial institution, acceptable to the
Lender;
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(vi) Accounts with respect to which the Account Debtor is the United
States or any department, agency or instrumentality of the United States,
any state of the United States, or any city, town, municipality, or
division thereof unless such Account has been assigned to the Lender in
accordance with (A) the Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 203 ET SEQ.) with respect to the United States or any
department, agency or instrumentality of the United States or (B) any
similar statute in effect in any state of the United States, or any city,
town, municipality, or division thereof with respect to such state, city,
town, municipality or division;
(vii) Accounts with respect to which the Account Debtor is a
subsidiary of, related to, has common shareholders, officers or directors
with, or otherwise controls, is controlled by or is under common control
with, the Borrower;
(viii) Accounts with respect to which the Borrower is or may become
liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower to the extent of the amount by which the
Borrower is or may be liable to the Account Debtor for goods sold or
services rendered by the Account Debtor;
(ix) Accounts with respect to an Account Debtor whose total
obligations to the Borrower exceed ten percent (10%) of the aggregate
amount of all Eligible Accounts (other than an Account Debtor whose
unsecured debt is rated as investment grade by Standard & Poor's
Corporation and Moody's Investors Service) to the extent of the obligations
of such Account Debtor in excess of such percentage;
(x) Accounts which are subject to any unapplied debits, to the extent
of such unapplied debits, and Accounts with respect to which the Account
Debtor otherwise disputes liability or makes any claim with respect
thereto, or is subject to any insolvency proceeding, or becomes insolvent,
or goes out of business;
(xi) Accounts the collection of which the Lender believes to be
doubtful by reason of the Account Debtor's financial condition; and
(xii) Accounts owed by an Account Debtor that has failed to pay fifty
percent (50%) or more of the aggregate amount of its accounts owed to the
Borrower within ninety (90) days of the date of the applicable invoices.
"ENVIRONMENTAL LAW" means any Requirement of Law derived from or
relating to federal, state and local laws or regulations relating to or
addressing the environment, health or
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safety, including but not limited to CERCLA, OSHA and RCRA, and any state or
local equivalent thereof.
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental Law, or (ii)
damages arising from, or costs incurred by such Governmental Authority in
response to, a Release or threatened Release of a Contaminant into the
environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure
of any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Environmental Cleanup
Responsibility Acts" or "Responsible Transfer Acts".
"EQUIPMENT" means all of the Borrower's and each of its
Subsidiaries' respective present and future (i) equipment, including, without
limitation, machinery, manufacturing, distribution, selling, data processing
and office equipment, assembly systems, tools, molds, dies, fixtures,
appliances, furniture, furnishings, vehicles, vessels, aircraft, aircraft
engines, and trade fixtures, (ii) other tangible personal Property (other
than the Borrower's and each such Subsidiary's respective Inventory), and
(iii) any and all accessions, parts and appurtenances attached to any of the
foregoing or used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
any amendments thereto, any successor statutes, and any regulations or
guidance promulgated thereunder.
"ERISA AFFILIATE" means (i) any Person which is a member of the
same controlled group of Persons (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Borrower; (ii) a partnership or other trade or
business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with the
Borrower; and (iii) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Internal Revenue Code) as the Borrower, any
Person described in CLAUSE (i) above or any partnership or trade or business
described in CLAUSE (ii) above.
"EVENT OF DEFAULT" means any of the occurrences set forth in
SECTION 10.01 after the expiration of any applicable grace period and the
giving of any applicable notice, in each case as expressly provided in
SECTION 10.01.
"EXCESS CASH FLOW" means, for any Fiscal Year, an amount equal to
(i) Cash Flow for such Fiscal Year, MINUS (ii) income taxes paid in cash
during such Fiscal Year, MINUS (iii)
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state sales taxes arising in connection with the Purchase which are paid in
cash during such Fiscal Year, MINUS (iv) Capital Expenditures paid in cash
during such Fiscal Year, MINUS (v) Transaction Costs paid in cash during such
Fiscal Year, MINUS (vi) interest on permitted Indebtedness of the Parent and
its Subsidiaries paid in cash during such Fiscal Year, including, without
limitation, the interest component of all Capital Leases, MINUS (vii) for
Fiscal Year 1994, $2,000,000, MINUS (viii) for Fiscal Year 1995 and each
Fiscal Year thereafter, scheduled amortization of the principal portion of
the Term Loan during such Fiscal Year, MINUS (ix) extraordinary cash losses
incurred during such Fiscal Year, MINUS (x) Liabilities and Costs paid in
cash during such Fiscal Year and incurred in connection with any Remedial
Action, PLUS (xi) extraordinary cash gains for such Fiscal Year, PLUS (xii)
any cash gain for such Fiscal Year with respect to any inventory or accounts
purchased from MAL in connection with the Purchase, to the extent included in
the calculation of net income (or loss), PLUS (or MINUS) (xiii) any decrease
(or increase) in Net Working Capital since the last day of the then
immediately preceding Fiscal Year, the amount for such Fiscal Year in each
case determined in conformity with GAAP for the Parent, the Borrower and
their respective Subsidiaries on a consolidated basis.
"EXCESS PROCEEDS OF ISSUANCE OF STOCK OR INDEBTEDNESS" means net
cash proceeds received by the Borrower or any of its Subsidiaries at any time
after the Amendment and Restatement Effective Date on account of the issuance
of (i) Capital Stock of the Borrower or any of its Subsidiaries (other than
Capital Stock of a Subsidiary issued to the Borrower or to a Subsidiary of
the Borrower) or (ii) Indebtedness (other than Indebtedness permitted under
SECTION 8.01) of the Borrower or any of its Subsidiaries, in each case net of
all transaction costs and underwriters' discounts with respect thereto.
"EXISTING CREDIT AGREEMENT" is defined in the preliminary statements
hereto.
"EXPORT LICENSE" means any and all licenses, authorizations,
approvals or applications therefor relating to exports, reexports, temporary
exports, temporary imports and imports, as the case may be, granted by or
pending before the United States Department of Commerce, the United States
Department of State or any other United States Governmental Authority.
"FACILITY SECURITY CLEARANCE" means an administrative determination
by the applicable United States Government Authority that, from a security
viewpoint, a facility is eligible for access to classified information of a
certain category and all lower categories.
"FAIR MARKET VALUE" means, with respect to any asset, the value of the
consideration obtainable in a sale of such asset
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in the open market, assuming a sale by a willing seller to a willing
purchaser dealing at arm's length and arranged in an orderly manner over a
reasonable period of time, each having reasonable knowledge of the nature and
characteristics of such asset, neither being under any compulsion to act,
determined (a) in good faith by the board of directors of the Borrower or (b)
in an appraisal of such asset, PROVIDED, that such appraisal was performed
relatively contemporaneously with such sale by an independent third party
appraiser and the basic assumptions underlying such appraisal have not
materially changed since the date thereof.
"FIRST AMENDMENT" is defined in the preliminary statements hereto.
"FIRST AMENDMENT EFFECTIVE DATE" means the Amendment Effective Date
under (and as defined in) the First Amendment.
"FISCAL YEAR" means the fiscal year of the Borrower, which shall be
the 12-month period ending on December 31 of each calendar year.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for
the benefit of the employees of the Borrower, any of its Subsidiaries or any
of its ERISA Affiliates and is not covered by ERISA pursuant to ERISA Section
4(b)(4).
"FOREIGN PENSION PLAN" means any employee benefit plan as defined
in Section 3(3) of ERISA which (i) is maintained or contributed to for the
benefit of employees of the Borrower, any of its Subsidiaries or any of its
ERISA Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of
ERISA, and (iii) under applicable local law, is required to be funded through
a trust or other funding vehicle.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accounting Standards Board or in such
other statements by such other entity as may be in general use by significant
segments of the accounting profession as in effect on the date hereof (unless
otherwise specified herein as in effect on another date or dates).
"GENERAL INTANGIBLES" means all of the Borrower's and its
Subsidiaries' respective present and future (i) general intangibles, (ii)
rights, interests, choses in action, causes of action, claims and other
intangible Property of every kind and nature (other than Accounts), (iii)
corporate and other business records, (iv) loans, royalties, and other
obligations receivable, (v) trademarks, registered trademarks, trademark
applications, service marks, registered service marks, service mark
applications, patents, patent applications, trade names, rights
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of use of any name, labels, fictitious names, inventions, designs, trade
secrets, computer programs, software, printouts and other computer materials,
goodwill, registrations, copyrights, copyright applications, permits,
licenses, franchises, customer lists, credit files, correspondence, and
advertising materials, (vi) customer and supplier contracts, firm sale
orders, rights under license and franchise agreements, rights under tax
sharing agreements, and other contracts and contract rights, (vii) interests
in partnerships and joint ventures, (viii) tax refunds and tax refund claims,
(ix) right, title and interest under leases, subleases, licenses and
concessions and other agreements relating to Property, (x) deposit accounts
(general or special) with any bank or other financial institution (including,
without limitation, the Collection Accounts and the "Collection Accounts"
under (and as defined in) the RCL Loan Agreement), (xi) credits with and
other claims against third parties (including carriers and shippers), (xii)
rights to indemnification and with respect to support and keep-well
agreements, (xiii) reversionary interests in pension and profit sharing plans
and reversionary, beneficial and residual interests in trusts, (xiv) proceeds
of insurance of which the Borrower or such Subsidiary is beneficiary, (xv)
letters of credit, guarantees, Liens, security interests and other security
held by or granted to the Borrower or such Subsidiary, (xvi) uncertificated
securities, and (xvii) governmental certificates and certifications,
including, without limitation, certificates and certifications relating to
Government Contracts and Export Licenses, authorizations and approvals,
issued to the Borrower or such Subsidiary.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
federal, state, provincial, local or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GOVERNMENT CONTRACT" means any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase order of
the Borrower or any of its Subsidiaries which is entered into with or
submitted to any United States Governmental Authority or any agency, agent or
instrumentality thereof, including, among other things, all contracts and
work authorizations to supply goods and services to the United States
Government.
"INDEBTEDNESS", as applied to any Person, means, at any time, (i) all
indebtedness, obligations or other liabilities of such Person (A) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instruments, and any accrued interest, fees and charges relating
thereto, (B) under profit payment agreements or in respect of obligations to
redeem, repurchase or exchange any Securities of such Person or to pay dividends
in respect of any stock, (C) with respect to letters of credit issued for such
Person's account,
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(D) to pay the deferred purchase price of property or services, except
accounts payable and accrued expenses arising in the ordinary course of
business, (E) in respect of Capital Leases, (F) which are Accommodation
Obligations or (G) under warranties and indemnities; (ii) all indebtedness,
obligations or other liabilities of such Person or others secured by a Lien
on any property of such Person, whether or not such indebtedness, obligations
or liabilities are assumed by such Person, all as of such time; (iii) all
preferred stock subject (upon the occurrence of any contingency or otherwise)
to mandatory redemption; and (iv) all contingent Contractual Obligations with
respect to any of the foregoing.
"INDEX RATE" means the higher of:
(i) the highest prime or base rate of interest published in New York
City by any of Morgan Guaranty Trust Company of New York, Citibank, N.A.
and Chemical Bank (whether or not such rate is actually charged by any such
bank); and
(ii) the latest published rate for 90-day directly placed commercial
paper (or the mid-point in the range of such rates, if more than one rate
is published) as quoted either in the Federal Reserve Rate Report which
customarily appears in the Friday issue of THE WALL STREET JOURNAL under
"Money Rates" or in such other publication as the Lender may, from time to
time hereafter, designate in writing.
"INITIAL CLOSING DATE" means the date the Initial Term Loan was made.
"INITIAL TERM LOAN" is defined in SECTION 2.01(a).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"INVENTORY" means all of the Borrower's and each of its Subsidiaries'
respective present and future (i) inventory, (ii) goods, merchandise and other
personal Property furnished or to be furnished under any contract of service or
intended for sale or lease, and all consigned goods and all other items which
have previously constituted Equipment but are then currently being held for sale
or lease in the ordinary course of the Borrower's or such Subsidiary's business,
(iii) raw materials, work-in-process and finished goods, (iv) materials and
supplies of any kind, nature or description used or consumed in the Borrower's
or such Subsidiary's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the Property
described in CLAUSES (i) through (iii) above, (v) goods in which the Borrower or
such Subsidiary has a joint or other interest or right of any kind
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(including, without limitation, goods in which the Borrower or such
Subsidiary has an interest or right as consignee), and (vi) goods which are
returned to or repossessed by the Borrower or such Subsidiary; in each case
whether in the possession of the Borrower, such Subsidiary, a bailee, a
consignee, or any other Person for sale, storage, transit, processing, use or
otherwise, and any and all documents for or relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest
in Securities, issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any
other Person, including all Indebtedness to such Person arising from a sale
of property by such Person other than in the ordinary course of its business.
The amount of any Investment shall be the original cost of such Investment,
plus the cost of all additions thereto less the amount of any return of
capital or principal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or decreases in value
or write-ups, write-downs or write-offs with respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"ISSUING BANK" means any bank or financial institution which issues a
Letter of Credit at the request of the Lender for the account of the Borrower
pursuant to SECTION 2.03.
"KAYNAR FEMIPARI" means K.T.I. Femipari KFT, a company organized under
the laws of Hungary.
"KAYNAR INTERNATIONAL" means Kaynar Technologies International Sales
Corp., a company organized under the laws of Barbados.
"KAYNAR U.K." means Kaynar Technologies Ltd., a company organized
under the laws of England and Wales.
"L/C DOCUMENTS" is defined in SECTION 2.03(g)(ii).
"LENDER" is defined in the preamble hereto.
"LETTER OF CREDIT" means any letter of credit issued by the Lender
or an Issuing Bank pursuant to SECTION 2.03 or, to the extent outstanding on
the Amendment and Restatement Effective Date, pursuant to SECTION 2.03 of the
Existing Credit Agreement.
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<PAGE>
"LETTER OF CREDIT FEE" is defined in SECTION 2.05(a).
"LETTER OF CREDIT OBLIGATIONS" means, at any particular time, the
sum of (i) all outstanding Reimbursement Obligations at such time, PLUS (ii)
the aggregate undrawn face amount of all outstanding Letters of Credit at
such time.
"LETTER OF CREDIT REIMBURSEMENT AGREEMENT" means, with respect to a
Letter of Credit, such form of application therefor and form of reimbursement
agreement therefor (whether in a single or several documents, taken together)
as the Lender may employ in the ordinary course of business for its own
account, with such modifications thereto as may be agreed upon by the Lender
and the Borrower.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful
or wanton injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation, feasibility
or Remedial Action studies), fines, penalties and monetary sanctions,
interest, direct or indirect, known or unknown, absolute or contingent, past,
present or future.
"LIFO RESERVE" means, as of any date of determination, that amount
of accounting reserve taken by the Borrower to reduce the carrying value of
Inventory from a first-in-first-out method to a last-in-first-out method of
Inventory accounting, all in accordance with GAAP, as reflected in the books
and records of the Borrower as of that date.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security
interest, encumbrance, lien (statutory or other), preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever in respect of any property of a Person, whether granted
voluntarily or imposed by law, and includes the interest of a lessor under a
Capital Lease or under any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement or similar notice (other than a financing statement filed by a
"true" lessor pursuant to Section 9-408 of the Uniform Commercial Code),
naming the owner of such property as debtor, under the Uniform Commercial
Code or other comparable law of any jurisdiction.
"LOAN ACCOUNT" is defined in SECTION 3.04(b).
"LOAN DOCUMENTS" means this Agreement (and for the applicable
period, the Existing Credit Agreement), the Notes, the Security Agreement,
the Patent Security Agreements, the Trademark Security Agreements, the Pledge
Agreements and all other
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instruments, agreements and written Contractual Obligations between the
Borrower or any Subsidiary of the Borrower and the Lender delivered to the
Lender pursuant to or in connection with the transactions contemplated hereby
or by the Existing Credit Agreement.
"LOANS" means the Term Loan and the Revolving Loans.
"MAL" means Microdot Aerospace Limited, a company organized under the
laws of the United Kingdom, and a wholly-owned Subsidiary of Microdot.
"MAL PURCHASE AGREEMENT" means, to the extent the assets of MAL
have been made available in accordance with the AFS Purchase Agreement, the
agreement by and between MAL, the Borrower and Kaynar U.K., pursuant to which
the Borrower and Kaynar U.K. agree to purchase substantially all of the
assets of MAL, which agreement shall be in form and substance satisfactory to
the Lender.
"MANAGEMENT DISCUSSION AND ANALYSIS" is defined in SECTION 6.02.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i)
the financial condition, operations, assets or prospects of the Parent, the
Borrower or any of their respective Subsidiaries, (ii) the ability of the
Parent, the Borrower or any of their respective Subsidiaries to perform their
respective obligations under the Transaction Documents, or (iii) the ability
of the Lender to enforce the Loan Documents.
"MICRODOT" means Microdot Inc., a Delaware corporation.
"MICRODOT LOAN AGREEMENT" means that certain Loan and Security
Agreement dated as of December 30, 1983 between Lender and Microdot, as
amended, as amended and restated by that certain Amended and Restated Loan
and Security Agreement dated as of April 1, 1989 between Lender and Microdot,
as further amended by Amendment No. 1 thereto dated as of December 8, 1992.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Borrower or any ERISA Affiliate.
"NET CASH PROCEEDS OF SALE" means (i) proceeds received by the
Borrower or any of its Subsidiaries in cash from the sale, assignment or
other disposition of (but not the lease or license of) any Property, other
than sales permitted under CLAUSES (ii) through (vi) of SECTION 8.02, net of
(A) the costs of sale, assignment or other disposition, (B) any income,
franchise, transfer or other tax liability arising from such transaction and
(C) amounts required to be applied to the repayment of Indebtedness secured
by a Lien permitted by SECTION 8.03 on the
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<PAGE>
asset disposed of, if such net proceeds arise from any individual sale,
assignment or other disposition or from any group of related sales,
assignments or other dispositions; and (ii) proceeds of insurance on account
of the loss of, damage to or the occurrence of any other insured risk with
respect to, any such Property or Properties, and payments of compensation for
any such Property or Properties taken by condemnation or eminent domain, as
provided in SECTION 7.07.
"NET WORKING CAPITAL" means, as of any date of determination, the
excess, if any, of (i) consolidated current assets, except cash and Cash
Equivalents, over (ii) consolidated current liabilities, except current
maturities of long-term debt as of such date, in each case for the Parent and
its Subsidiaries on a consolidated basis.
"NET WORKING CAPITAL TO SENIOR INDEBTEDNESS RATIO" means, as of any
date of determination, the ratio of (i) Net Working Capital as of such date
PLUS any LIFO Reserve as of such date actually deducted from inventory
carrying value in the determination of Net Working Capital to (ii) the
outstanding principal balance of the Term Loan and the Revolving Loans and
the undrawn face amount of all Letters of Credit outstanding as of such date.
"NOTE" means the Term Note or the Revolving Credit Note and "NOTES"
means the Term Note and the Revolving Credit Note.
"NOTICE OF BORROWING" means a notice substantially in the form of
EXHIBIT F attached hereto and made a part hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Lender, or any
Person entitled to indemnification pursuant to SECTION 11.02 of this
Agreement, of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, arising under this Agreement, the
Notes or any other Loan Document, whether or not for the payment of money,
whether arising by reason of an extension of credit, issuance or amendment of
a Letter of Credit or payment of any draft drawn thereunder, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest (including, without limitation, interest,
whether or not allowed under Section 502 of the Bankruptcy Code or otherwise,
at the then applicable rate (including the rate in effect from time to time
under SECTION 2.04(c)) specified herein that accrues after the commencement
of any proceeding under the Bankruptcy Code or other applicable bankruptcy,
reorganization, insolvency, dissolution, liquidation or other debtor relief
Requirement of Law), charges, expenses, fees, attorneys' fees and
disbursements and any other
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sum chargeable to the Borrower under this Agreement or any other Loan
Document.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a
corporation by (i) the chairman or vice-chairman of its board of directors
(if an officer of such corporation) or (ii) its president, any of its
vice-presidents, its chief financial officer, or its treasurer.
"OPERATING LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is
not a Capital Lease.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any corporation,
limited liability company, unlimited liability company or partnership (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation or limited liability company, (ii) the
partnership agreement executed by the partners in the partnership, (iii) the
certificate of registration and memorandum and articles of association of
such unlimited liability company, (iv) the by-laws (or the equivalent
governing documents) of the corporation, limited liability company, unlimited
liability company or partnership, and (iv) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of
any class or series of such corporation's Capital Stock or such limited
liability company's, unlimited liability company's or partnership's equity or
ownership interests.
"ORIGINAL AMENDMENTS" is defined in the preliminary statements hereto.
"ORIGINAL CREDIT AGREEMENT" is defined in the preliminary statements
hereto.
"OSHA" means the Occupational Safety and Health Act of 1970, any
amendments thereto, any successor statutes and any regulations or guidance
promulgated thereunder.
"PARENT" means Kaynar Holdings Inc., a Delaware corporation.
"PARENT AGREEMENTS" means (i) the Parent Loan Agreement and the
agreements, documents and instruments executed in connection therewith and (ii)
the PIK Dividend Note Agreement and the PIK Dividend Notes.
"PARENT LOAN AGREEMENT" means that certain Term Loan Agreement dated
as of January 3, 1994 by and between the Parent and the Lender, as amended and
as amended and restated by that certain Amended and Restated Term Loan Agreement
of even date herewith by and between the Parent and the Lender, as the same may
be further amended, restated, supplemented or modified from time to time.
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"PATENT SECURITY AGREEMENTS" means (i) that certain Patent Security
Agreement dated as of January 3, 1994, in the form of EXHIBIT D-1 attached
hereto and made a part hereof, executed by the Borrower in favor of the Lender,
pursuant to which the Borrower grants a security interest to the Lender in all
of the Borrower's domestic patents, patent applications, patent licenses and
related Property, (ii) that certain Supplemental Patent Security Agreement dated
as of March 10, 1994, in the form of EXHIBIT D-2 attached hereto and made a part
hereof, executed by the Borrower in favor of the Lender, pursuant to which the
Borrower grants a security interest to the Lender in all of the Borrower's
foreign patents, patent applications, patent licenses and related Property and
(iii) the Supplement to Patent Security Agreements of even date herewith in
substantially the form of EXHIBIT D-3 attached hereto and made a part hereof, as
any of the same may be further amended, restated, supplemented or modified from
time to time.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"PCBS" means polychlorinated biphenyls.
"PERMITS" means any license, permit, variance, interim permit, permit
application, approval, consent, certification, qualification or other
authorization under any Requirement of Law applicable to the Borrower or any of
its Subsidiaries or otherwise required by any Governmental Authority in
connection with the business or operations of the Borrower or any of its
Subsidiaries, including, without limitation, any license, permit, consent,
certification, approval, authorization or qualification relating to any
Government Contract.
"PERMITTED EXISTING ACCOMMODATION OBLIGATIONS" means the Accommodation
Obligations of the Borrower and its Subsidiaries identified as such on SCHEDULE
1.01.2.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.3.
"PERMITTED EXISTING LIENS" means the Liens on the Property of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.4.
"PERSON" means any natural person, corporation, limited liability
company, unlimited liability company, limited partnership, general partnership,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any Governmental Authority.
"PERSONNEL SECURITY CLEARANCE" means an administrative determination
by the applicable United States Governmental
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<PAGE>
Authority that an individual is eligible, from a security point of view, for
access to classified information of the same or lower category as the level
of the personnel clearance being granted.
"PIK DIVIDEND NOTE AGREEMENT" means that certain PIK Dividend Note
Agreement dated as of January 3, 1994 by and between the Parent and the Lender,
as the initial holder of the preferred stock of the Parent, and the other
Persons from time to time party thereto as "Holders" (as defined therein), as
the same may be amended, restated, supplemented or modified from time to time.
"PIK DIVIDEND NOTES" means the outstanding promissory notes issued by
the Parent pursuant to the PIK Dividend Note Agreement.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(i) in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign
Employee Benefit Plan.
"PLEDGE AGREEMENTS" means (i) the Charge Over Shares, and (ii) a
pledge agreement of even date herewith, in substantially the form of EXHIBIT E
attached hereto and made a part hereof, executed by the Borrower in favor of the
Lender, pursuant to which the Borrower pledges and grants a security interest to
the Lender in all (or such lesser amount as is set forth therein) of the issued
and outstanding Capital Stock of its Subsidiaries and related Property, as the
same may be amended, restated, supplemented or modified from time to time.
"POTENTIAL EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"PROCESS AGENT" is defined in SECTION 11.15.
"PROPERTY" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, Equipment,
Inventory, General Intangible, Account, or other asset owned, leased or operated
by the Borrower or its Subsidiaries, as applicable, (including any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
"PURCHASE" means, collectively, (i) the purchase by the Borrower from
Microdot of substantially all of the assets of AFS pursuant to the AFS Purchase
Agreement and (ii) to the extent the assets of MAL have been made available in
accordance with the AFS Purchase Agreement, the purchase by the Borrower and
Kaynar U.K. of substantially all of the assets of MAL pursuant to the MAL
Purchase Agreement.
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"PURCHASE AGREEMENTS" means the AFS Purchase Agreement and, to the
extent the assets of MAL have been made available in accordance with the AFS
Purchase Agreement, the MAL Purchase Agreement, and "PURCHASE AGREEMENT" means
either of them.
"PURCHASE DOCUMENTS" means the Purchase Agreements and all of the
agreements, documents and instruments executed in connection with either of
them.
"RCL" means RCL Pty, an unlimited liability company organized under
the laws of the State of Victoria, Australia.
"RCL LOAN AGREEMENT" means that certain Term Loan Agreement of even
date herewith by and between RCL and the Lender, as the same may be amended,
restated, supplemented or modified from time to time.
"RCL LOAN DOCUMENTS" means the RCL Loan Agreement and the agreements,
documents and instruments executed in connection therewith.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Sections 6901 ET SEQ., any amendments thereto, any successor statutes,
and any regulations or guidance promulgated thereunder.
"REAL PROPERTY" means all of the Borrower's and each of its
Subsidiaries' respective present and future right, title and interest
(including, without limitation, any leasehold estate) in (i) any plots, pieces
or parcels of land, (ii) any improvements, buildings, structures and fixtures
now or hereafter located or erected thereon or attached thereto of every nature
whatsoever (the rights and interests described in CLAUSE (i) or (ii) above being
the "Premises"), (iii) all easements, rights of way, gores of land or any lands
occupied by streets, ways, alleys, passages, sewer rights, water courses, water
rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in or on the Premises and (v) all other rights and privileges thereunto
belonging or appertaining and all extensions, additions, improvements,
betterments, renewals, substitutions and replacements to or of any of the rights
and interests described in CLAUSE (iii) or (iv) above.
"RECOIL ACQUISITION" means, collectively, (i) the purchase by the
Borrower of substantially all of the assets of Recoil U.S. pursuant to the
Recoil U.S. Acquisition Agreement and (ii) the purchase by the Borrower, RCL
and, if designated by the Borrower to acquire the shares of Recoil U.K., Kaynar
U.K. of
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substantially all of the assets of Recoil Australia pursuant to the Recoil
Australia Acquisition Agreement and related documents.
"RECOIL ACQUISITION AGREEMENTS" means the Recoil U.S. Acquisition
Agreement and the Recoil Australia Acquisition Agreement, and "RECOIL
ACQUISITION AGREEMENT" means either of them.
"RECOIL ACQUISITION DOCUMENTS" means the Recoil Acquisition Agreements
and all of the agreements, documents and instruments executed in connection with
either of them.
"RECOIL AUSTRALIA" means Recoil Pty Ltd, a company organized under the
laws of the State of Victoria, Australia.
"RECOIL AUSTRALIA ACQUISITION AGREEMENT" means that certain Australian
Asset Sale Agreement dated August 9, 1996 among the Borrower, RCL, Recoil
Australia and the other Vendors, pursuant to which the Vendors agree to sell,
and the Borrower and RCL agree to purchase, substantially all of the assets of
Recoil Australia.
"RECOIL AUSTRALIA HOLDINGS" means Recoil Australia Holdings, Inc., a
Delaware corporation.
"RECOIL BELGIUM" means Recoil Marketing BVBA, a company organized
under the laws of Belgium.
"RECOIL HOLDINGS" means Recoil Holdings, Inc., a Delaware corporation.
"RECOIL U.K." means Recoil (Europe) Limited., a company organized
under the laws of England and Wales.
"RECOIL U.S." means Recoil Inc., an Oregon corporation.
"RECOIL U.S. ACQUISITION AGREEMENT" means that certain US Asset Sale
Agreement dated August 9, 1996 among the Borrower, Recoil U.S., Recoil Australia
and the other Vendors, pursuant to which Recoil U.S. agrees to sell, and the
Borrower agrees to purchase, substantially all of the assets of Recoil U.S.
"REIMBURSEMENT DATE" is defined in SECTION 2.03(d)(i)(A).
"REIMBURSEMENT OBLIGATIONS" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to amounts
drawn under Letters of Credit.
"RELEASE" means release, presence, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any Property or Third Party
Property, including the movement of Contaminants through or in
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the air, soil, surface water, groundwater, Property or Third Party Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REPORTABLE EVENT" means any of the events described in Section 4043
of ERISA and the regulations promulgated thereunder as in effect from time to
time, excluding any event with respect to which the 30-day notice requirement is
waived in the applicable regulations.
"REQUIREMENTS OF LAW" means, as to any Person, the Organizational
Documents of such Person, and any law, rule or regulation, or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject including, without limitation, the
Securities Act, the Securities Exchange Act, ERISA, the Fair Labor Standards Act
and any certificate of occupancy, zoning ordinance, building, environmental or
land use requirement or Permit or environmental, labor, employment, occupational
safety or health law, ordinance, rule, regulation or common law.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of the Borrower or any of its Subsidiaries now or hereafter outstanding,
and (iii) any payment made to redeem, purchase, repurchase or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of Capital Stock of the Borrower or any of its
Subsidiaries now or hereafter outstanding.
"REVOLVING CREDIT COMMITMENT" means the obligation of the Lender to
make Revolving Loans and to issue, or cause to be issued, Letters of Credit
pursuant to the terms and conditions of this Agreement (and, for the applicable
period, the Existing Credit Agreement), in an aggregate amount (including all
Letter of Credit Obligations and the principal amount of all Revolving Loans)
which shall not exceed (i) from the Initial Closing Date through and including
December 31, 1994, $6,500,000, (ii) from January 1, 1995 until the Third
Amendment Effective Date,
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$5,000,000 and (iii) from the Third Amendment Effective Date until the
Revolving Credit Termination Date, $9,500,000.
"REVOLVING CREDIT NOTE" is defined in SECTION 2.02(e)(i).
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum
of (i) the outstanding principal amount of the Revolving Loans at such time,
PLUS (ii) the Letter of Credit Obligations at such time.
"REVOLVING CREDIT TERMINATION DATE" is defined in SECTION
2.02(e)(iii).
"REVOLVING LOAN" is defined in SECTION 2.02(a).
"REVOLVING LOAN FUNDING DATE" means, with respect to any Revolving
Loan, the date of the funding of such Revolving Loan.
"SCHEDULED MATURITY DATE" means the fifth (5th) anniversary of the
Initial Closing Date.
"SECOND SUPPLEMENTAL TERM LOAN" is defined in SECTION 2.01(a).
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates of
interest, shares, or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire
any of the foregoing, but shall not include any evidence of the Obligations.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
"SECURITY AGREEMENT" means that certain Security Agreement dated as of
January 3, 1994, in the form of EXHIBIT G-1 attached hereto and made a part
hereof, executed by the Borrower in favor of the Lender, pursuant to which the
Borrower grants a security interest to the Lender in substantially all of the
Borrower's personal Property, as amended and supplemented by the Amendment and
Supplement to Security Agreement of even date herewith in substantially the form
of EXHIBIT G-2 attached hereto and made a part hereof, as the same may be
further amended, restated, supplemented or modified from time to time.
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"SOLVENT", when used with respect to any Person, means that at the
time of determination:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its debts (including, without
limitation, contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
"SUBSIDIARY" of a Person means any corporation, limited liability
company, unlimited liability company, general or limited partnership, or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions with respect to such entity are at the time directly or
indirectly owned or controlled by such Person, one or more of the other
subsidiaries of such Person or any combination thereof.
"SUPPLEMENTAL TERM LOAN" is defined in SECTION 2.01(a).
"TAXES" is defined in SECTION 3.03(a).
"TERM LOAN" is defined in SECTION 2.01(a).
"TERM LOAN COMMITMENT" means the obligation of the Lender to make its
Term Loan pursuant to the terms and conditions of this Agreement (and, for the
applicable period, the Existing Credit Agreement), which shall be in an
aggregate principal amount of (a) prior to the First Amendment Effective Date,
$15,800,000, (b) on and after the First Amendment Effective Date until the Third
Amendment Effective Date, $17,800,000, (c) on and after the Third Amendment
Effective Date until the Amendment and Restatement Effective Date, $19,425,000
and (d) on and after the Amendment and Restatement Effective Date, $22,425,000
as permanently reduced from time to time by payments or prepayments on the Term
Loan made pursuant to SECTION 2.01(d) or SECTION 3.01.
"TERM NOTE" is defined in SECTION 2.01(d).
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate from a
Benefit Plan during a plan year in
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which the Borrower or such ERISA Affiliate was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA or the cessation of operations of a
facility which results in the termination of employment of 20% of Benefit
Plan participants who are employees of the Borrower or any ERISA Affiliate;
(iii) the imposition of an obligation on the Borrower or any ERISA Affiliate
under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC or any similar
foreign Governmental Authority of proceedings to terminate a Benefit Plan or
a Foreign Pension Plan; (v) any event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit
Plan; (vi) a foreign Governmental Authority shall appoint or institute
proceedings to appoint a trustee to administer any Foreign Pension Plan; or
(vii) the partial or complete withdrawal of the Borrower or any ERISA
Affiliate from a Multiemployer Plan or a Foreign Pension Plan.
"THIRD AMENDMENT" is defined in the preliminary statements hereto.
"THIRD AMENDMENT EFFECTIVE DATE" has the meaning specified in the
Third Amendment.
"THIRD PARTY PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank or unit or equipment
owned, leased or operated by any Person other than the Borrower or its
Subsidiaries (including, without limitation, any surface water thereon or
adjacent thereto and soil and ground water thereunder).
"THIRD SUPPLEMENTAL TERM LOAN" is defined in SECTION 2.01(a).
"TRADEMARK SECURITY AGREEMENTS" means (i) that certain Trademark
Security Agreement dated as of January 3, 1994, in the form of EXHIBIT H-1
attached hereto and made a part hereof, executed by the Borrower in favor of the
Lender, pursuant to which the Borrower grants a security interest to the Lender
in all of the Borrower's domestic trademarks, service marks, tradenames,
trademark applications, trademark licenses and related goodwill and other
Property, (ii) that certain Supplemental Trademark Security Agreement dated as
of March 10, 1994, in the form of EXHIBIT H-2 attached hereto and made a part
hereof, executed by the Borrower in favor of the Lender, pursuant to which the
Borrower grants a security interest to the Lender in all of the Borrower's
foreign trademarks, service marks, tradenames, trademark applications, trademark
licenses and related goodwill and other Property and (iii) the Amendment and
Supplement to Trademark Security Agreements of even date herewith in
substantially the form of EXHIBIT H-3 attached hereto and made
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a part hereof, as any of the same may be further amended, restated,
supplemented or modified from time to time.
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Parent, the Borrower and their respective Subsidiaries in connection with the
execution, delivery and performance of the Transaction Documents.
"TRANSACTION DOCUMENTS" means (i) the Loan Documents, (ii) the Parent
Agreements, (iii) the Purchase Documents, (iv) the RCL Loan Documents and (v)
the Recoil Acquisition Documents.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as enacted
in the State of California, as it may be amended from time to time.
"VENDORS" means Recoil Australia, Advent Limited, Australian Pacific
Technology Limited, Western Pacific Investment Company Limited, Mr. Bruce Price,
B. Price Holdings Pty Ltd and Lenarde Pty Ltd.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, PROVIDED, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month.
1.03. ACCOUNTING TERMS. Subject to SECTION 11.03, for purposes of
this Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.04. REFERENCES TO THIS AGREEMENT. The words "hereof", "herein",
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, subsection, clause, schedule and exhibit references herein are
references to articles, sections, subsections, clauses, schedules and exhibits
to this Agreement unless otherwise specified.
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1.05. MISCELLANEOUS TERMS. All terms defined in this Agreement in
the singular shall have comparable meanings when used in the plural, and VICE
VERSA, unless otherwise specified. The term "including" is by way of example
and not limitation. A reference to a statute, ordinance, code or other
Requirement of Law includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of any of them. A
reference to a Person includes a reference to the Person's executors,
administrators, successors, substitutes (including Persons taking by novation)
and assigns.
1.06. OTHER TERMS. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings assigned to
such terms by the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.01. TERM LOAN. (a) AMOUNT OF TERM LOAN. The Lender (i) has made
a term loan, in Dollars, to the Borrower on the Initial Closing Date in an
aggregate amount equal to $15,800,000 (the "Initial Term Loan"), (ii) has made a
term loan, in Dollars, to the Borrower on the First Amendment Effective Date, in
an aggregate amount equal to $2,000,000 (the "Supplemental Term Loan"), (iii)
has made a term loan, in Dollars, to the Borrower on the Third Amendment
Effective Date, in an aggregate amount equal to $2,000,000 (the "Second
Supplemental Term Loan") and (iv) subject to the terms and conditions set forth
in this Agreement, hereby agrees to make a term loan, in Dollars, to the
Borrower on the Amendment and Restatement Effective Date, in an aggregate amount
equal to $4,000,000 (the "Third Supplemental Term Loan" and together with the
Initial Term Loan, the Supplemental Term Loan and the Second Supplemental Term
Loan, the "Term Loan"). After giving effect to the advance of the Third
Supplemental Term Loan, the outstanding principal balance of the Term Loan will
be $22,425,000.
(b) NOTICE OF BORROWING. When the Borrower desires to borrow the
Third Supplemental Term Loan under this SECTION 2.01, it shall deliver to the
Lender a Notice of Borrowing, signed by it, on the Amendment and Restatement
Effective Date. Such Notice of Borrowing shall specify (i) the amount of the
proposed Borrowing, and (ii) instructions for the disbursement of the proceeds
of the proposed Borrowing. In lieu of delivering such a Notice of Borrowing,
the Borrower may give the Lender telephonic notice of the Borrowing of the Third
Supplemental Term Loan on the Amendment and Restatement Effective Date, if it
confirms such notice by delivery of the Notice of Borrowing to the Lender
promptly, but in no event later than 5:00 p.m. (Chicago time) on the same day.
Any Notice of Borrowing (or telephonic notice in
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lieu thereof) given pursuant to this SECTION 2.01(b) shall be irrevocable.
(c) MAKING OF THIRD SUPPLEMENTAL TERM LOAN. Promptly after receipt
of a Notice of Borrowing under SECTION 2.01(b) (or telephonic notice in lieu
thereof), the Lender shall deposit an amount equal to the amount requested by
the Borrower to be made in respect of the Third Supplemental Term Loan under
this SECTION 2.01(c), in immediately available funds, not later than 1:00 p.m.
(Chicago time) on the Amendment and Restatement Effective Date. Subject to the
fulfillment of the conditions precedent set forth in SECTION 4.01, the Lender
shall make the proceeds of such amounts available to the Borrower by disbursing
such proceeds on the Amendment and Restatement Effective Date to an account
specified in a written notice from the Lender to the Borrower or in accordance
with the Borrower's disbursement instructions set forth in such Notice of
Borrowing.
(d) TERM NOTE; REPAYMENT OF THE TERM LOAN. (i) On the Initial
Closing Date, the Borrower executed and delivered to the Lender a promissory
note evidencing the Initial Term Loan. On the First Amendment Effective Date,
Borrower executed and delivered to the Lender a substitute promissory note
evidencing the Initial Term Loan and the Supplemental Term Loan. On the Third
Amendment Effective Date, Borrower executed and delivered to the Lender a second
substitute promissory note evidencing the Initial Term Loan, the Supplemental
Term Loan and the Second Supplemental Term Loan. On the Amendment and
Restatement Effective Date, the Borrower shall execute and deliver to the Lender
a third substitute promissory note, in substantially the form of EXHIBIT I
attached hereto and made a part hereof, evidencing the Term Loan (the "Term
Note"). After the Amendment and Restatement Effective Date, the Borrower shall
make the following quarterly installments in respect of the outstanding
principal balance of the Term Loan, payable on the dates and in the amounts set
forth opposite such dates below:
PAYMENT DATE PRINCIPAL INSTALLMENT
------------ ---------------------
October 1, 1996 $ 200,000
January 1, 1997 $ 200,000
April 1, 1997 $ 300,000
July 1, 1997 $ 300,000
October 1, 1997 $ 300,000
January 1, 1998 $ 325,000
April 1, 1998 $ 625,000
July 1, 1998 $ 625,000
October 1, 1998 $ 625,000
The outstanding principal balance of the Term Loan shall be payable in full on
the earlier of (x) the Scheduled Maturity Date (or, if not a Business Day, the
immediately preceding Business Day), and (y) the date of acceleration of the
Obligations or termination of the Commitments pursuant hereto.
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(ii) In addition to the scheduled payments on the Term Loan, the
Borrower may make the voluntary prepayments described in SECTION 3.01(a)(i)
and shall make the mandatory prepayments prescribed in SECTION 3.01(B), for
credit against such scheduled payments on the Term Loan pursuant to SECTION
3.01(a)(i) or SECTION 3.01(b), as applicable.
(e) USE OF PROCEEDS OF THIRD SUPPLEMENTAL TERM LOAN. The proceeds
of the Third Supplemental Term Loan shall be used (i) to pay the "Purchase
Price" under (and as defined in) the Recoil U.S. Acquisition Agreement, (ii)
to pay (and enable Kaynar U.K. to pay) that portion of the "Purchase Price"
under (and as defined in) the Recoil Australia Acquisition Agreement
attributable to the Capital Stock of Recoil Belgium and Recoil U.K., (iii) to
make capital contributions to Recoil Holdings and Recoil Australia Holdings,
the proceeds of which will be contributed to the capital of RCL (and the
Borrower shall cause RCL to use the proceeds of such capital contributions
for the purposes set forth in Section 2.01(e) of the RCL Loan Agreement) and
(iv) for working capital in the ordinary course of the Borrower's business
and for other lawful general corporate purposes.
2.02. REVOLVING CREDIT FACILITY. (a) AVAILABILITY. The Lender
has made from the Initial Closing Date until the Amendment and Restatement
Effective Date and, subject to the terms and conditions set forth in this
Agreement, hereby agrees to make from the Amendment and Restatement Effective
Date until the Business Day immediately preceding the Revolving Credit
Termination Date, revolving loans, in Dollars (each individually, a
"Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower
from time to time during such period, PROVIDED, that the aggregate principal
amount of Revolving Loans outstanding at any time shall not exceed the
Borrowing Base at such time, MINUS the Letter of Credit Obligations at such
time. Subject to the provisions of this Agreement (including, without
limitation, SECTION 4.02), the Borrower may repay any outstanding Revolving
Loan on any day which is a Business Day and any amounts so repaid may be
reborrowed, up to the amount available under this SECTION 2.02(a) at the time
of such Borrowing, until the Business Day immediately preceding the Revolving
Credit Termination Date.
(b) NOTICE OF BORROWING. When the Borrower desires to borrow
under this SECTION 2.02, it shall deliver to the Lender a Notice of
Borrowing, signed by it, (x) on the Amendment and Restatement Effective Date,
in the case of a Borrowing of Revolving Loans on the Amendment and
Restatement Effective Date and (y) no later than 1:00 p.m. (Chicago time) on
the Business Day immediately preceding the proposed Revolving Loan Funding
Date. Such Notice of Borrowing shall specify (i) the proposed Revolving Loan
Funding Date (which shall be a Business Day), (ii) the amount of the proposed
Borrowing, (iii) the Revolving Credit Obligations outstanding as of the date
of the proposed Revolving Loan Funding Date (after giving effect to such
proposed
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Borrowing), and (iv) instructions for the disbursement of the proceeds of the
proposed Borrowing. In lieu of delivering such a Notice of Borrowing, the
Borrower may give the Lender telephonic notice of any proposed Borrowing by
the time required under this SECTION 2.02(b), if it confirms such notice by
delivery of the Notice of Borrowing to the Lender promptly, but in no event
later than 5:00 p.m. (Chicago time) on the same day. Any Notice of Borrowing
(or telephonic notice in lieu thereof) given pursuant to this SECTION 2.02(b)
shall be irrevocable.
(c) MAKING OF REVOLVING LOANS. Promptly after receipt of a Notice
of Borrowing under SECTION 2.02(b) (or telephonic notice in lieu thereof),
the Lender shall deposit an amount equal to the amount requested by the
Borrower to be made as Revolving Loans, in immediately available funds, not
later than 1:00 p.m. (Chicago time) on any Revolving Loan Funding Date
applicable thereto. Subject to the fulfillment of the conditions precedent
set forth in SECTION 4.01 or 4.02, as applicable, the Lender shall make the
proceeds of such amounts available to the Borrower by disbursing such
proceeds on such Revolving Loan Funding Date to an account specified in a
written notice from the Lender to the Borrower or in accordance with the
Borrower's disbursement instructions set forth in the applicable Notice of
Borrowing.
(d) USE OF PROCEEDS OF REVOLVING LOANS. The proceeds of Revolving
Loans shall be used for working capital in the ordinary course of the
business of the Borrower and for other lawful general corporate purposes.
(e) REVOLVING CREDIT NOTE; REPAYMENT OF THE REVOLVING LOANS;
REVOLVING CREDIT TERMINATION DATE. (i) On the Initial Closing Date,
Borrower executed and delivered to the Lender a promissory note evidencing
the Revolving Loans and the then existing Revolving Credit Commitment. On
the Third Amendment Effective Date, the Borrower executed and delivered to
the Lender a substitute promissory note in the form of EXHIBIT J evidencing
the Revolving Loans and the Revolving Credit Commitment (the "Revolving
Credit Note").
(ii) The Borrower may make the voluntary prepayments described in
SECTION 3.01(a) and shall make the mandatory prepayments prescribed in
SECTION 3.01(b), for credit against such scheduled payments on the Revolving
Loans pursuant to SECTION 3.01(A) or SECTION 3.01(b), as applicable.
(iii) The Revolving Credit Commitment shall terminate, and all
outstanding Revolving Credit Obligations (together with any accrued and unpaid
interest thereon) shall be paid in full (or, in the case of unmatured Letter of
Credit Obligations, provision for payment in cash shall be made to the
satisfaction of the Lender) on the day (the "Revolving Credit Termination Date")
which is the earlier of (A) the Scheduled Maturity Date (or, if not a Business
Day, the immediately preceding Business Day) and (B) the date of acceleration of
the Obligations or
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termination of the Revolving Credit Commitment pursuant hereto. The Lender's
obligation to make Revolving Loans shall terminate on the Business Day
immediately preceding the Revolving Credit Termination Date.
2.03. LETTERS OF CREDIT. Subject to the terms and conditions set
forth in this Agreement, the Lender hereby agrees to issue, or cause the
issuance of, for the account of the Borrower, one or more Letters of Credit,
subject to the following provisions:
(a) TYPES AND AMOUNTS. The Lender shall not have any obligation to
issue, or cause the issuance of, any Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect
to such Issuing Bank, after giving effect to the issuance of the
Letter of Credit requested hereunder, shall exceed any limit imposed
by law or regulation upon the Lender;
(ii) if (A) immediately after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations at such time
shall exceed $1,000,000, or the Revolving Credit Obligations at such
time shall exceed the Borrowing Base at such time, or (B) one or more
of the conditions precedent contained in SECTION 4.01 or 4.02, as
applicable, shall not on such date be satisfied;
(iii) which has an expiration date later than the earlier of (A)
the date one (1) year after the date of issuance (without regard to
any automatic renewal provisions thereof) and (B) the Business Day
immediately preceding the Revolving Credit Termination Date; and
(iv) which is in a currency other than Dollars.
(b) CONDITIONS. In addition to being subject to the satisfaction of
the conditions precedent contained in SECTIONS 4.01 and 4.02, as applicable, the
obligation of the Lender to issue, amend or extend (or cause an Issuing Bank to
issue, amend or extend) any Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i) if the Lender so requests, the Borrower shall execute and
deliver to the Lender a Letter of Credit Reimbursement Agreement and
such other documents and materials as may be required pursuant to the
terms thereof, in the form customarily required by Lender, PROVIDED,
that it is hereby agreed and understood that, to the extent the terms
of any such Letter of Credit Reimbursement Agreement is inconsistent
with the terms
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of this Agreement, the terms of this Agreement shall control; and
(ii) the terms of the proposed Letter of Credit shall be
satisfactory to the Issuing Bank in its sole discretion.
(c) ISSUANCE OF LETTERS OF CREDIT. The Borrower shall request the
issuance of Letters of Credit by giving the Lender written notice thereof not
later than 1:00 p.m. (Chicago time) on the third (3rd) Business Day preceding
the requested date for issuance thereof under this Agreement, or such shorter
notice as may be acceptable to the Lender. Such notice shall be irrevocable
unless and until such request is denied by the Lender and shall specify (i)
the type of Letter of Credit being requested, (ii) the stated amount of the
Letter of Credit requested, (iii) the effective date (which shall be a
Business Day) of issuance of such Letter of Credit, (iv) the date on which
such Letter of Credit is to expire (which shall be a Business Day and no
later than the Business Day immediately preceding the Revolving Credit
Termination Date), (v) the Person for whose benefit such Letter of Credit is
to be issued, (vi) other relevant terms of such Letter of Credit, and (vii)
the Revolving Credit Obligations and the Letter of Credit Obligations
outstanding as of the date of (and after giving effect to) the proposed
issuance of such Letter of Credit.
(d) REIMBURSEMENT OBLIGATIONS; DUTIES OF ISSUING BANKS. (i)
Notwithstanding any provisions to the contrary in any Letter of Credit
Reimbursement Agreement:
(A) the Borrower shall reimburse the Lender for amounts paid by
the Lender pursuant to any sight draft, receipt or cable or written
demand for payment presented to the Lender in connection with a Letter
of Credit, in Dollars, no later than the date (the "Reimbursement
Date") which is the earlier of (I) the time specified in the
applicable Letter of Credit Reimbursement Agreement and (II) demand
therefor by the Lender; and
(B) all Reimbursement Obligations with respect to any Letter of
Credit shall bear interest at the rate specified in SECTION 2.04(a)
from the date of the relevant drawing under such Letter of Credit
until the Reimbursement Date and thereafter at the rate specified in
SECTION 2.04(c).
(ii) No action taken or omitted in good faith by the Lender or any
Issuing Bank under or in connection with any Letter of Credit shall put the
Lender or such Issuing Bank under any resulting liability the Borrower.
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(e) PAYMENT OF REIMBURSEMENT OBLIGATIONS. The Borrower
unconditionally agrees to pay to the Lender (including without limitation by
operation of SECTION 3.02(b)(iii)), in Dollars, the amount of all
Reimbursement Obligations, interest and other amounts payable to the Lender
under or in connection with the Letters of Credit when such amounts are due
and payable, irrespective of any claim, setoff, defense or other right which
the Borrower may have at any time against any Issuing Bank or any other
Person.
(f) ISSUING BANK CHARGES. The Borrower shall pay to the Lender
the standard charges (of which the Borrower shall be advised in writing)
assessed by the Lender, or the charges paid by the Lender to an Issuing Bank,
in connection with the issuance, administration, amendment and payment or
cancellation of Letters of Credit.
(g) INDEMNIFICATION; EXONERATION. (i) In addition to all other
amounts payable to the Lender, the Borrower hereby agrees to defend,
indemnify, and save the Lender and each Issuing Bank harmless from and
against any and all claims, demands, liabilities, penalties, damages, losses
(other than loss of profits), costs, charges and expenses (including
reasonable attorneys' fees but excluding taxes) which the Lender or such
Issuing Bank may incur or be subject to as a consequence, direct or indirect,
of (A) the issuance of any Letter of Credit other than as a result of the
gross negligence or willful misconduct of the Lender or such Issuing Bank, as
determined by a court of competent jurisdiction, (B) the failure of the
Lender or such Issuing Bank issuing a Letter of Credit to honor a drawing
under such Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future DE JURE or DE FACTO government
or Governmental Authority or (C) the transfer, sale, delivery, surrender or
endorsement of any bill of lading, warehouse receipt or other document at any
time(s) held by the Lender or any Issuing Bank, or any of their respective
correspondents or agents used by the Lender or such Issuing Bank in
connection with the issuance of Letters of Credit.
(ii) As between the Borrower on the one hand and the Lender and the
Issuing Banks on the other hand, the Borrower assumes all risks of the acts
and omissions of, or misuse of Letters of Credit by, the respective
beneficiaries of the Letters of Credit. In furtherance and not in limitation
of the foregoing, subject to the provisions of the Letter of Credit
Reimbursement Agreements, the Issuing Banks and the Lender shall not be
responsible for: (A) the form, validity, legality, sufficiency, accuracy,
genuineness or legal effect of the documents submitted by any party in
connection with the application for, issuance of, or the drawing under the
Letters of Credit (collectively, the "L/C Documents"), even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the existence, character, quality, quantity,
condition, packing or value of the property
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purporting to be represented by any L/C Document; (C) the time, place, manner
or order in which shipment is made; (D) partial or incomplete shipment or
failure or omission to ship any or all of the property referred to in the
applicable Letters of Credit or any L/C Documents pertaining thereto; (E) the
character, adequacy, validity or genuineness of any insurance or solvency or
responsibility of any insurer or any other risk connected with insurance; (F)
any deviation from instructions, delay, default or fraud by the shipper or
anyone else in connection with the property referred to in the applicable
Letter of Credit or the L/C Documents pertaining thereto, or the shipping of
such property; (G) the insolvency, responsibility or relationship to the
property of any party issuing any L/C Document in connection with the
property referred to in any Letter of Credit; (H) delay in arrival or failure
to arrive of the property referred to in the applicable Letter of Credit or
the L/C Documents pertaining thereto; (I) delay in giving or failure to give
notice of arrival or any other notice; (J) any breach of contract between the
shipper(s) or vendor(s) and the consignee(s) or buyer(s) of the property
represented by any L/C Document; (K) failure of any instrument to bear any
reference or adequate reference to the applicable Letter of Credit or failure
of any L/C Document to accompany any instrument at negotiation, or failure of
any Person to note the amount of any instrument on the reverse of any Letter
of Credit or to send forward L/C Documents apart from instruments as required
by the terms of the applicable Letter of Credit or to send forward L/C
Documents apart from instruments as required by the terms of the Letter of
Credit, each of which provisions, if contained in such Letter of Credit, it
is agreed may be waived by the Lender or the applicable Issuing Bank; (L) the
validity, legality or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (M) failure of the beneficiary
of a Letter of Credit to comply duly with conditions required in order to
draw upon such Letter of Credit; (N) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (O) errors
in interpretation of technical terms; (P) any loss or delay in the
transmission or otherwise of any L/C Document required in order to make a
drawing under any Letter of Credit or of the proceeds thereof; (Q) the
misapplication by the beneficiary of a Letter of Credit of the proceeds of
any drawing under such Letter of Credit; and (R) any consequences arising
from causes beyond the control of the Lender or any Issuing Bank.
2.04. INTEREST. (a) RATE OF INTEREST. All Loans and the
outstanding principal balance of all other Obligations shall bear interest on
the unpaid principal amount thereof from the date such Loans are made and such
other Obligations are due and payable until paid in full, except as otherwise
provided in SECTION 2.04(c), at a rate per annum equal to the sum of (i) the
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Index Rate, as in effect from time to time as interest accrues, PLUS (ii) one
and one-half percent (1.50%).
(b) INTEREST PAYMENTS. (i) Interest accrued on each Loan shall
be payable in arrears (A) with respect to interest accrued and unpaid as of
the end of any calendar month, on the first day of the immediately succeeding
calendar month, commencing on the first such day following the making of such
Loan, (B) upon the payment or prepayment of such Loan in full, and (C) if not
theretofore paid in full, at maturity (whether by acceleration or otherwise)
of such Loan.
(ii) Interest accrued on the principal balance of all other
Obligations shall be payable in arrears (A) on the last day of each calendar
month, commencing on the first such day following the incurrence of such
Obligation, (B) upon repayment thereof in full or in part, and (C) if not
theretofore paid in full, at the time such other Obligation becomes due and
payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTION 2.04(a) or elsewhere in this Agreement, effective
immediately upon (i) the occurrence of an Event of Default described in
SECTION 10.01(a) or (ii) the occurrence of any other Event of Default and
notice from the Lender of the effectiveness of this SECTION 2.04(c), and for
as long thereafter as such Event of Default shall be continuing, the
principal balance of all Loans, and the principal balance of all other
Obligations, shall bear interest at a rate which is three and one-half
percent (3.50%) per annum in excess of the Index Rate.
(d) COMPUTATION OF INTEREST. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period
during which interest accrues and a year of 360 days. In computing interest
on any Loan, the date of the making of the Loan shall be included and the
date of payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is
repaid in accordance with the terms hereof on the same day prior to 1:00 p.m.
(Chicago time) on which it is made, no interest shall be paid on such Loan.
2.05. FEES. (a) LETTER OF CREDIT FEE. In addition to any
charges paid pursuant to SECTION 2.03(f), the Borrower shall pay to the
Lender, for its own account, a fee (the "Letter of Credit Fee") accruing at a
rate equal to one percent (1.00%) per annum on the undrawn face amount of
each outstanding Letter of Credit, payable monthly, in arrears, on the first
day of each calendar month thereafter; PROVIDED, HOWEVER, that upon (i) the
occurrence of an Event of Default described in SECTION 10.01(a) or (ii) the
occurrence of any other Event of Default and notice from the Lender of the
effectiveness of SECTION 2.04(c), and for so long thereafter as such Event of
Default shall be continuing,
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the rate at which the Letter of Credit Fee shall accrue and be payable shall
be equal to three percent (3.00%) per annum.
(b) AMENDMENT AND RESTATEMENT FEE. In addition to the Letter of
Credit Fee, the Borrower shall pay to the Lender on the Amendment and
Restatement Effective Date, a fee of $200,000.
(c) CALCULATION AND PAYMENT OF FEES. The Letter of Credit Fee
shall be calculated on the basis of the actual number of days elapsed in a
360-day year. All fees payable under this SECTION 2.05 shall be payable in
addition to, and not in lieu of, interest, compensation, expense
reimbursements, indemnification and other Obligations. All such fees shall
be payable to the Lender by wire transfer to an account specified in a
written notice from the Lender to the Borrower in immediately available
funds. All fees shall be fully earned and nonrefundable when paid. All fees
specified or referred to in this Agreement due to the Lender, including,
without limitation, those referred to in this SECTION 2.05, shall constitute
Obligations and shall be secured by all of the Collateral.
2.06. AUTHORIZED OFFICERS AND AGENTS. On the Amendment and
Restatement Effective Date and from time to time thereafter when necessary,
the Borrower shall deliver to the Lender an Officer's Certificate setting
forth the names of the officers, employees and agents authorized to request
Loans and Letters of Credit and containing a specimen signature of each such
officer, employee or agent. The officers, employees and agents so authorized
shall also be authorized to act for the Borrower in respect of all other
matters relating to the Loan Documents. The Lender shall be entitled to rely
conclusively on such officer's or employee's authority to request such Loan
or Letter of Credit until the Lender receives written notice to the contrary.
The Lender shall have no duty to verify the authenticity of the signature
appearing on any written Notice of Borrowing or any other document, and, with
respect to an oral request for such a Loan or Letter of Credit the Lender
shall have no duty to verify the identity of any person representing himself
or herself as one of the officers, employees or agents authorized to make
such request or otherwise to act on behalf of the Borrower. The Lender shall
incur no liability to the Borrower or any other Person in acting upon any
telephonic notice referred to above which the Lender believes in good faith
to have been given by a duly authorized officer or other person authorized to
borrow on behalf of the Borrower.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. PREPAYMENTS; REDUCTIONS IN COMMITMENTS.
(a) VOLUNTARY PREPAYMENTS/REDUCTIONS. (i) The Borrower may, upon at
least one (1) Business Day's prior written
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notice to the Lender, at any time and from time to time, prepay any Loan, in
whole or in part. Unless the aggregate outstanding principal balance of the
Term Loan is to be prepaid in full, voluntary prepayments of the Term Loan
shall be in an aggregate minimum amount of $100,000 and integral multiples of
$100,000 in excess of that amount. Each voluntary prepayment shall be
applied to the unpaid installments of the Term Loan in the forward order of
maturity and shall permanently reduce the Term Loan Commitment of the Lender.
Any notice of prepayment given to the Lender under this SECTION 3.01(a)(i)
shall specify the date (which shall be a Business Day) of prepayment and the
aggregate principal amount of the prepayment. When notice of prepayment is
delivered as provided herein, the principal amount of the Loans specified in
the notice shall become due and payable on the prepayment date specified in
such notice.
(ii) The Borrower, upon at least one (1) Business Day's prior
written notice to the Lender, shall have the right, at any time and from time
to time, to terminate in whole or permanently reduce in part the Revolving
Credit Commitment, provided that the Borrower shall have made whatever
payment in respect of the Revolving Loans which may be required to reduce the
principal amount of all Revolving Credit Obligations then outstanding to an
amount less than or equal to the Revolving Credit Commitment as reduced or
terminated. Any partial reduction of the Revolving Credit Commitment shall
be in an aggregate minimum amount of $100,000 and integral multiples of
$100,000 in excess of that amount, and shall reduce the Revolving Credit
Commitment of the Lender by such amount. Any notice of termination or
reduction given to the Lender under this SECTION 3.01(a)(ii) shall specify
the date (which shall be a Business Day) of such termination or reduction
and, with respect to a partial reduction, the aggregate principal amount
thereof. When notice of termination or reduction is delivered as provided
herein, the principal amount of the Loans specified in the notice shall
become due and payable on the date specified in such notice.
(iii) The repayments and prepayments in respect of reductions and
terminations described in this SECTION 3.01(a) may be made without premium or
penalty.
(b) MANDATORY PREPAYMENTS/REDUCTIONS.
(i) Within two (2) Business Days after the Borrower's or any of
its Subsidiaries' receipt of any Net Cash Proceeds of Sale, the Borrower
shall make or cause to be made a mandatory prepayment of the Obligations in
an amount equal to one hundred percent (100%) of such Net Cash Proceeds of
Sale; PROVIDED, HOWEVER, that, with respect to any such proceeds received by
or on behalf of RCL, Recoil Holdings or Recoil Australia Holdings, such
proceeds shall be payable to the Lender hereunder only after payment in full
of the "Obligations" under (and as defined in) the RCL Loan Agreement.
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(ii) Within ninety (90) days after the end of each Fiscal Year,
the Borrower shall calculate Excess Cash Flow for such Fiscal Year and shall
make a mandatory prepayment in an amount equal to seventy-five percent (75%)
of such Excess Cash Flow. The Borrower shall make an additional mandatory
prepayment on the date on which annual reports are required to be delivered
by SECTION 6.01(c) to the extent 75% of Excess Cash Flow determined in
accordance with the annual reports exceeds 75% of the Borrower's preliminary
calculation of Excess Cash Flow.
(iii) Within two (2) Business Days after the Borrower's or any of
its Subsidiaries' receipt of any Excess Proceeds of Issuance of Stock or
Indebtedness, the Borrower shall make or cause to be made a mandatory
prepayment in an amount equal to one hundred percent (100%) of such Excess
Proceeds of Issuance of Stock or Indebtedness; PROVIDED, HOWEVER, that, with
respect to any such proceeds received by or on behalf of RCL, Recoil Holdings
or Recoil Australia Holdings, such proceeds shall be payable to the Lender
hereunder only after payment in full of the "Obligations" under (and as
defined in) the RCL Loan Agreement.
(iv) Nothing in this SECTION 3.01(b) shall be construed to
constitute the Lender's consent to any transaction referred to in CLAUSES (i)
or (iii) above which is not expressly permitted by ARTICLE VIII.
(v) Each mandatory prepayment required by CLAUSES (i), (ii) and
(iii) of this SECTION 3.01(b) shall be referred to herein as a "Designated
Prepayment". The Borrower shall give the Lender not less than one (1)
Business Day's prior written notice or telephonic notice promptly confirmed
in writing, of the date on which each such Designated Prepayment will be made
(which date of prepayment shall be no later than the date on which such
Designated Payment becomes due and payable pursuant to this SECTION 3.01(b)).
(vi) Designated Prepayments shall be allocated and applied to the
Obligations as follows: (A) FIRST, to the unpaid installments of the Term
Loan in the inverse order of maturity (and the Term Loan Commitment shall be
permanently reduced by the amount of such Designated Prepayment so applied);
(B) SECOND, to the outstanding Revolving Loans (and the Revolving Loan
Commitment shall be permanently reduced by the amount of such Designated
Prepayment so applied); and (C) THIRD, to the Letter of Credit Obligations
then due and payable (or, to the extent such Letter of Credit Obligations are
contingent, deposited in an account maintained by the Lender to provide cash
collateral in respect of such Letter of Credit Obligations).
(vii) The Borrower shall, without notice or demand of any kind,
immediately make such prepayments of the Revolving Loans to the extent
necessary to reduce the aggregate outstanding
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Revolving Credit Obligations to an amount less than or equal to the Borrowing
Base at such time.
(viii) All collections of Accounts included in the Collateral and
other proceeds of Collateral shall be deposited in a Collection Account which
is subject to a Collection Account Agreement. Each Collection Account Bank
shall remit to the Concentration Account (or such other account as may be
designated from time to time by the Lender) in accordance with instructions
contained in the applicable Collection Account Agreement, on a daily basis
and by wire transfer or through an automated clearing house, all collected
funds on deposit in the Collection Account(s) maintained by such Collection
Account Bank. Any of the foregoing collections received by the Borrower or
any of its Subsidiaries and not so deposited, shall be deemed to have been
received by such Person in trust for the Lender, and upon such Person's
receipt thereof, such Person shall immediately transfer all such amounts into
the Concentration Account in their original form (with any necessary
endorsement). The Borrower acknowledges and agrees that each of the
Collection Accounts shall be maintained for the purpose of creating a
collection point for amounts representing proceeds of Accounts and other
personal Property which are part of the Collateral. The Concentration
Account and each of the Collection Accounts shall at all times be under the
exclusive dominion and control of the Lender, and the Borrower shall have no
right to withdraw or direct the payment of any funds on deposit in the
Concentration Account or any Collection Account (except to the Lender or its
designee as provided herein). All collections of Accounts and all proceeds
of Collateral will be the sole property of the Lender and will be deemed
received for application on the Obligations as follows: (A) FIRST, to the
payment of outstanding fees, expenses and indemnities, (B) SECOND, to the
outstanding Revolving Loans (and any amounts so applied may be reborrowed
subject to the provisions of this Agreement, including, without limitation,
SECTIONS 2.02 AND 4.02), (C) THIRD, to the outstanding Letter of Credit
Obligations then due and payable, (D) FOURTH, to the payment of all other
outstanding Obligations (other than unpaid installments of the Term Loan or
Letter of Credit Obligations) then due and payable, (E) FIFTH, to the unpaid
installments of the Term Loan in the inverse order of maturity (and the Term
Loan Commitment shall be permanently reduced by the amount of such prepayment
so applied), and (F) SIXTH, to the extent such Letter of Credit Obligations
are contingent, such collections and proceeds shall be deposited in an
account maintained by the Lender to provide cash collateral in respect of
such Letter of Credit Obligations). The Lender shall apply the proceeds of
any item deposited in the Concentration Account to payment of the Obligations
on the day on which the bank at which the Concentration Account is maintained
receives final settlement for the item.
3.02. PAYMENTS. (a) MANNER AND TIME OF PAYMENT. All payments and
prepayments of principal of and interest on the
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Loans, Reimbursement Obligations and other Obligations (including, without
limitation, fees and expenses) which are payable to the Lender shall be made
without condition or reservation of right, in immediately available funds,
delivered to the Lender not later than 1:00 p.m. (Chicago time) on the date
and at the place due, to such account of the Lender as it may designate; and
funds received by the Lender, including, without limitation, funds in respect
of any Revolving Loans to be made on that date, not later than 1:00 p.m.
(Chicago time) on any given Business Day shall be credited against payment to
be made that day and funds received by the Lender after that time shall be
deemed to have been paid on the immediately following Business Day. All
payments and prepayments of Obligations shall be made in Dollars, and the
Borrower waives any right which it has under any Requirement of Law to repay
the Obligations in a currency other than Dollars.
(b) APPLICATION OF PAYMENTS. (i) Subject to the provisions of
SECTIONS 3.01 AND 3.02(b)(ii), all payments of principal and interest in
respect of outstanding Loans, all payments of fees and all other payments in
respect of any other Obligations, shall be applied FIRST, to pay all
Obligations then due and payable and SECOND, as the Borrower so designates.
Unless otherwise designated by the Borrower, all principal payments in
respect of Loans shall be applied FIRST, to the outstanding Revolving Loans,
and SECOND, to the outstanding Term Loan.
(ii) After the occurrence of an Event of Default and while the same
is continuing, the Lender shall apply all payments in respect of any
Obligations and all proceeds of Collateral in the following order:
(A) FIRST, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lender and the Issuing
Banks;
(B) SECOND, to pay principal of and interest on Letter of Credit
Obligations (or, to the extent such Obligations are contingent and the
Lender deems it appropriate in its sole discretion under the
circumstances, deposited in an account maintained by the Lender to
provide cash collateral in respect of such Obligations);
(C) THIRD, to pay interest due in respect of the Loans;
(D) FOURTH, to the payment or prepayment of principal
outstanding on Loans in such order as the Lender may determine in its
sole discretion; and
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(E) FIFTH, to the payment of all other Obligations.
(iii) The Lender, in its sole discretion subject only to the terms
of this SECTION 3.02(b)(iii), may pay from the proceeds of Revolving Loans
made to the Borrower hereunder, whether made following a request by the
Borrower pursuant to SECTION 2.02 or a deemed request as provided in this
SECTION 3.02(b)(iii), all amounts payable by the Borrower hereunder,
including, without limitation, amounts payable with respect to payments of
principal, interest, Reimbursement Obligations and fees and all
reimbursements for expenses pursuant to SECTION 11.01. No Revolving Loan
shall be made pursuant to this SECTION 3.02(b)(iii) for the purpose of paying
fees or reimbursements for expenses unless and until the Lender has sent to
the Borrower at least five (5) days prior to the making of the Revolving Loan
a statement describing the fees and expenses. The Borrower hereby
irrevocably authorizes the Lender to make Revolving Loans upon notice from
the Lender as described in the following sentence for the purpose of paying
principal, interest, Reimbursement Obligations and fees due from the
Borrower, reimbursing expenses pursuant to SECTION 11.01 and paying any and
all other amounts due and payable by the Borrower hereunder or under the
Notes, and agrees that all such Revolving Loans so made shall be deemed to
have been requested by it pursuant to SECTION 2.02 as of the date of the
aforementioned notice. The Lender shall promptly notify the Borrower of the
amount and Revolving Loan Funding Date of the proposed Borrowing and that
such Borrowing is being requested on the Borrower's behalf pursuant to this
SECTION 3.02(b)(iii). On the proposed Revolving Loan Funding Date, the
Lender shall make the requested Loans in accordance with the procedures and
subject to the conditions specified in SECTION 2.02.
(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be
made by the Borrower hereunder or under the Notes is stated to be due on a
day which is not a Business Day, the payment shall instead be due on the
immediately following Business Day, and any such extension of time shall be
included in the computation of the payment of interest and fees hereunder.
3.03. TAXES. (a) PAYMENT OF TAXES. Any and all payments by the
Borrower hereunder or under any Note or other document evidencing any
Obligations shall be made, in accordance with SECTION 3.02, free and clear of
and without reduction for any and all present or future taxes, levies,
imposts, deductions, charges, withholdings, duties, and all stamp,
transaction or documentary taxes, excise taxes, ad valorem taxes and other
taxes imposed on the value of the Property, charges or levies which arise
from the execution, delivery or registration, or from payment or performance
under, or otherwise with respect to, any of the Loan Documents or the
Commitments and all other liabilities with respect thereto (including any
related interest, penalties, fines and expenses in connection with any of
them)
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excluding taxes imposed on or measured by net income or overall gross
receipts and capital and franchise taxes imposed on the Lender by (i) the
United States, (ii) the Governmental Authority of any jurisdiction in which
the Lender has an office or any political subdivision thereof or (iii) the
Governmental Authority in which the Lender is organized, managed and
controlled or any political subdivision thereof (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and duties being
hereinafter referred to as "Taxes"). If the Borrower shall be required by
law to withhold or deduct any Taxes from or in respect of any sum payable
hereunder or under any such Note or document to the Lender (x) the sum
payable to the Lender shall be increased as may be necessary so that after
making all required withholding or deductions (including withholding or
deductions applicable to additional sums payable under this SECTION 3.03) the
Lender receives an amount equal to the sum it would have received had no such
withholding or deductions been made, (y) the Borrower shall make such
withholding or deductions, and (z) the Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) INDEMNIFICATION. The Borrower will indemnify the Lender
against, and reimburse the Lender on demand for, the full amount of all Taxes
(including, without limitation, any Taxes imposed by any Governmental
Authority on amounts payable under this SECTION 3.03 and any additional
income or franchise taxes resulting therefrom) incurred or paid by the Lender
or any of its Affiliates and any liability (including penalties, additions to
tax, interest, and out-of-pocket expenses paid to third parties) arising
therefrom or with respect thereto, whether or not such Taxes were lawfully
payable. A certificate as to any additional amount payable to any Person
under this SECTION 3.03 submitted by it to the Borrower shall, absent
manifest error, be final, conclusive and binding upon all parties hereto.
The Lender agrees, within a reasonable time after receiving a written request
from the Borrower, to provide the Borrower with such certificates as are
reasonably required, and take such other actions as are reasonably necessary
to claim such exemptions as the Lender may be entitled to claim in respect of
all or a portion of any Taxes which are otherwise required to be paid or
deducted or withheld pursuant to this SECTION 3.03 in respect of any payments
under this Agreement or under the Notes.
(c) RECEIPTS. Within thirty (30) days after the date of any
payment of Taxes by the Borrower, it will furnish to the Lender, at its
address referred to in SECTION 11.06, the original or a certified copy of a
receipt evidencing payment thereof.
3.04. PROMISE TO REPAY; EVIDENCE OF INDEBTEDNESS.
(a) PROMISE TO REPAY. The Borrower hereby agrees to pay when due
the principal amount of each Loan which is made to it, and further agrees to
pay all unpaid interest accrued
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thereon, in accordance with the terms of this Agreement and Notes.
(b) LOAN ACCOUNT. The Lender shall maintain in accordance with
its usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to the Lender resulting from each Loan owing to
the Lender from time to time, including the amount of principal and interest
payable and paid to the Lender from time to time hereunder and under the
Notes.
(c) ENTRIES BINDING. The entries made in the Loan Account shall
be conclusive and binding for all purposes, absent manifest error.
ARTICLE IV
CONDITIONS TO LOANS
4.01. CONDITIONS PRECEDENT TO AMENDMENT AND RESTATEMENT EFFECTIVE
DATE LOANS AND LETTERS OF CREDIT. The obligation of the Lender to make the
Third Supplemental Term Loan and any Revolving Loan on the Amendment and
Restatement Effective Date and to issue, or cause the issuance of, any Letter
of Credit requested to be issued on the Amendment and Restatement Effective
Date shall be subject to the satisfaction of all of the following conditions
precedent:
(a) DOCUMENTS. The Lender shall have received on or before the
Amendment and Restatement Effective Date all of the following, each duly
executed and acknowledged where appropriate and in form and substance
satisfactory to the Lender:
(i) this Agreement, together with all Schedules hereto which
shall be in each case true, complete and correct in all material
respects as of the Amendment and Restatement Effective Date;
(ii) the Term Note;
(iii) a Notice of Borrowing completed in accordance with the
provisions of SECTION 2.01(b) and/or SECTION 2.02(b);
(iv) amendments and/or supplements to each of the Charge Over
Shares, Patent Security Agreements, Security Agreement and Trademark
Security Agreements substantially in the forms of EXHIBITS B-2, D-3,
G-2 and H-3, respectively;
(v) a Pledge Agreement with respect to 100% of the Capital Stock of
Recoil Holdings and Recoil Australia Holdings and 65% of the Capital Stock
of Kaynar Femipari, Kaynar International and Recoil Belgium;
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(vi) a collateral assignment with respect to all of the Borrower's
rights under the Recoil Acquisition Documents;
(vii) amendments (in recordable form) to the deeds of trust recorded
against the Borrower's Placentia and Fullerton, California Properties;
(viii) to the extent not previously delivered, Uniform Commercial
Code financing statements and/or amendment statements for filing in
jurisdictions in which any of the Collateral is located or deemed located;
(ix) favorable legal opinions, each dated the Amendment and
Restatement Effective Date, addressed to the Lender (or with respect to
which the Lender has been issued a reliance letter) from the following
counsel:
(A) O'Melveny & Myers LLP, United States counsel to the
Borrower, with respect to the Loan Documents, the Recoil
Acquisition Documents and related matters;
(B) Corrs Chambers Westgarth, Australian counsel to the
Borrower, with respect to the Recoil Acquisition Documents and
related matters;
(C) Goffin & Forges, Belgian counsel to the Borrower, with
respect to the transfer of Capital Stock of Recoil Belgium under the
Recoil Australia Acquisition Agreement and related documents;
(D) Herbert Smith, English counsel to the Borrower or, if
designated by the Borrower to acquire the shares of Recoil U.K.,
Kaynar U.K., with respect to the transfer of Capital Stock of Recoil
U.K. under the Recoil Australia Acquisition Agreement and related
documents;
(E) Goodwin, Procter & Hoar, United States counsel to Recoil
U.S., with respect to the Recoil U.S. Acquisition Agreement and
related matters;
(F) Norton Smith Gledhill, Australian counsel to Recoil
Australia and certain of the Vendors, with respect to the Recoil
Acquisition Documents and related matters; and
(G) Logie-Smith Lanyon, Australian counsel to certain of the
Vendors, with respect to the Recoil Acquisition Documents and related
matters;
(x) evidence that the Borrower has directed its counsel to prepare
and deliver to the Lender the respective
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opinions described in SUBCLAUSES (A) through (D) of CLAUSE (ix) above and
that Recoil U.S., Recoil Australia and the Vendors have directed their
respective counsel to prepare and deliver to the Lender the respective
opinions described in SUBCLAUSES (E) through (G) of CLAUSE (ix) above;
(xi) a certificate signed by the chief financial officer of the
Borrower certifying that all conditions precedent under this SECTION 4.01
have been met and no Potential Event of Default or Event of Default has
occurred or is continuing;
(xii) a solvency certificate for the Borrower and its
Subsidiaries, duly executed by the chief financial officer or
treasurer of such Person, dated the Amendment and Restatement
Effective Date and giving effect to the Recoil Acquisition and the
financing transactions contemplated under this Agreement, supported by
such analyses, valuations, appraisals, reviews, projections and other
documentation as the Lender deems appropriate;
(xiii) the PRO FORMA financials referred to in SECTION 5.01(g);
(xiv) documentation deemed adequate by the Lender showing the
Borrower's and its Subsidiaries' compliance with any financial
responsibility requirements of applicable Requirements of Law,
including, without limitation, those contained in 40 C.F.R. Parts 264
and 265, Subps. H, and state law equivalents, and those promulgated
pursuant to 42 U.S.C. Section 6991b(c)(6), and state equivalents; and
(xv) such additional documentation as the Lender may reasonably
request.
(b) PERFECTION OF LIENS; TITLE INSURANCE. Evidence that all
financing statements, mortgages and leasehold mortgages relating to the
Collateral have been filed or recorded where necessary to record or perfect
the Lender's security interest therein, title commitments, title endorsements
and surveys requested by the Lender have been issued to the Lender,
certificates representing Capital Stock included in the Collateral have been
delivered to the Lender (with duly executed stock powers) and all title
charges, recording fees and filing taxes have been paid.
(c) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Lender shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain (A) the making of the Loans or issuance of
Letters of Credit on the Amendment and Restatement Effective Date or (B) the
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consummation of the Recoil Acquisition or (ii) impose or result in the
imposition of a Material Adverse Effect.
(d) NO DEFAULT. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
Loans or the issuance of a Letter of Credit on the Amendment and Restatement
Effective Date.
(e) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in SECTION 5.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Amendment
and Restatement Effective Date.
(f) THE RECOIL ACQUISITION. (i) The Lender shall be satisfied in
all material respects (A) with the terms, form and substance of the Recoil
Acquisition and the Recoil Acquisition Documents, including, without
limitation, the resolutions with respect to the Recoil Acquisition adopted by
the respective boards of directors of the Borrower, RCL, Recoil Australia,
Recoil U.S. and the other parties to the respective Recoil Acquisition
Agreements, (B) that the parties to the Recoil Acquisition Agreements have
complied with all applicable Requirements of Law in connection with the
Recoil Acquisition, (C) that all conditions precedent to, and all consents
necessary to permit, the Recoil Acquisition pursuant to the Recoil
Acquisition Documents shall have been satisfied or delivered, or waived with
the prior written consent of the Lender, (D) that all Liens encumbering the
assets being purchased in the Recoil Acquisition have been terminated (other
than Liens permitted by SECTION 8.03) and (E) that the Recoil Acquisition
Documents have not been amended or modified without the prior written consent
of the Lender and are in full force and effect.
(ii) Substantially simultaneously with the consummation of the
transactions contemplated by this Agreement, the Parent Loan Agreement and
the RCL Loan Agreement, the Borrower shall have acquired substantially all of
the assets of Recoil U.S. pursuant to the Recoil U.S. Acquisition Agreement,
and the Borrower, RCL and, if designated by the Borrower to acquire the
shares of Recoil U.K., Kaynar U.K. shall have acquired substantially all of
the assets of Recoil Australia pursuant to the Recoil Australia Acquisition
Agreement and related documents, in each case in compliance with all
applicable Requirements of Law.
(g) ORGANIZATIONAL DOCUMENTS. The Lender shall have received copies,
certified to its satisfaction, of all Organizational Documents of the Borrower
and its Subsidiaries as in effect as of the Amendment and Restatement Effective
Date and determined them to be satisfactory in form and substance.
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(h) NO MATERIAL ADVERSE EFFECT. No event has occurred since the
Initial Closing Date which has had or is reasonably likely to have a Material
Adverse Effect.
(i) FEES AND EXPENSES PAID. There shall have been paid to the
Lender all fees and expenses due and payable on or before the Amendment and
Restatement Effective Date.
4.02. CONDITIONS PRECEDENT TO ALL SUBSEQUENT REVOLVING LOANS AND
LETTERS OF CREDIT. The obligation of the Lender to make any Revolving Loan
requested to be made on any date after the Amendment and Restatement
Effective Date and to issue, or cause the issuance of, any Letter of Credit
on any date after the Amendment and Restatement Effective Date is subject to
the following conditions precedent as of each such date:
(a) REPRESENTATIONS AND WARRANTIES. As of such date, both before
and after giving effect to the Loans to be made and Letters of Credit to be
issued on such date, all of the representations and warranties of the
Borrower contained in SECTION 5.01 and in any other Loan Document shall be
true and correct in all material respects (other than representations and
warranties which expressly speak as of a different date, which shall be true
and correct in all material respects as of that date).
(b) NO DEFAULTS. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan or issuance of the requested Letter of Credit.
(c) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and no litigation is pending or
threatened which is likely to, enjoin, prohibit or restrain, or impose or result
in the imposition of any material adverse condition upon, the making of the
requested Loan or issuance of the requested Letter of Credit.
(d) NO MATERIAL ADVERSE EFFECT. No event has occurred since the
Initial Closing Date which has had or is reasonably likely to have a Material
Adverse Effect.
Each submission by the Borrower to the Lender of a Notice of Borrowing with
respect to a Revolving Loan, each acceptance by the Borrower of the proceeds of
each Revolving Loan made hereunder, each request by the Borrower for the
issuance of a Letter of Credit and the issuance of such Letter of Credit shall
constitute a representation and warranty by the Borrower as of the Revolving
Loan Funding Date in respect of such Revolving Loan or the date of issuance of
such Letter of Credit (as applicable) that all the conditions contained in this
SECTION 4.02 have been satisfied or waived in accordance with SECTION 11.05.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Agreement and to make the Loans and the other
financial accommodations to the Borrower and to issue, or cause the issuance
of, Letters of Credit, the Borrower hereby represents and warrants to the
Lender that the following statements are true, correct and complete:
(a) ORGANIZATION; ORGANIZATIONAL POWERS. The Borrower and each of
its Subsidiaries (i) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) is duly
qualified to do business as a foreign corporation (or other entity) and is in
good standing under the laws of each jurisdiction in which failure to be so
qualified and in good standing will have or is reasonably likely to have a
Material Adverse Effect, (iii) to the extent required, has filed and
maintained effective (unless exempt from the requirements for filing) a
current Business Activity Report with the appropriate Governmental Authority
in the states of Minnesota and New Jersey, and (iv) has all requisite
corporate power and authority to own, operate and encumber its Property and
to conduct its business as proposed to be conducted in connection with and
following the consummation of the transactions contemplated by the
Transaction Documents.
(b) AUTHORITY. (i) The Borrower and each of its Subsidiaries
have the requisite corporate power and authority (A) to execute, deliver and
perform each of the Transaction Documents which are to be executed by it in
connection with the Purchase or the Recoil Acquisition or which have been
executed by it as required by this Agreement or the Existing Credit Agreement
on or prior to the Amendment and Restatement Effective Date and (B) to file
the Transaction Documents which must be filed by it in connection with the
Purchase or the Recoil Acquisition or which have been filed by it as required
by this Agreement or the Existing Credit Agreement on or prior to the
Amendment and Restatement Effective Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by the
Borrower or its Subsidiaries in connection with the Purchase or the Recoil
Acquisition or which have been executed or filed as required by this Agreement
or the Existing Credit Agreement on or prior to the Amendment and Restatement
Effective Date and to which the Borrower or any of its Subsidiaries is party and
the consummation of the transactions contemplated thereby, have been duly
approved by the respective boards of directors and, if necessary, the
shareholders of the Borrower and its Subsidiaries and such approvals have not
been rescinded. No other organizational action or proceedings on the part of
the Borrower or its Subsidiaries are necessary to consummate such transactions.
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(iii) Each of the Transaction Documents to which the Borrower or
any of its Subsidiaries is a party has been duly executed, delivered or
filed, as the case may be, by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, is in full
force and effect and no material term or condition thereof has been amended,
modified or waived from the terms and conditions contained in the Transaction
Documents delivered to the Lender pursuant to SECTION 4.01(a) without the
prior written consent of the Lender, and all parties thereto have performed
and complied with all the terms, provisions, agreements and conditions set
forth therein and required to be performed or complied with by such parties
on or before the Amendment and Restatement Effective Date, and no Potential
Event of Default, Event of Default or breach of any covenant by any such
party exists thereunder.
(c) CONSENTS. Except as set forth in SCHEDULE 5.01-C and for
approval of the Bankruptcy Court (solely with respect to the Purchase), no
consents or approvals of, or filings or registrations (other than filings or
registrations contemplated by SECTION 4.01(b) or 5.01(f)(i) with respect to
Government Contracts) by the Borrower or its Subsidiaries with any
Governmental Authority or any other Person not a party to this Agreement are
necessary in connection with the execution and delivery of the Transaction
Documents by the Borrower and its Subsidiaries and the consummation by the
Borrower and its Subsidiaries of the transactions contemplated by the
Transaction Documents, except where the failure to obtain such consents or
approvals would not result in a Material Adverse Effect.
(d) SUBSIDIARIES; OWNERSHIP OF CAPITAL STOCK. SCHEDULE 5.01-D
accurately sets forth (i) the correct legal name, the jurisdiction of
incorporation and the jurisdictions in which qualified to transact business
as a foreign corporation of each of the direct and indirect Subsidiaries of
the Borrower, (ii) the authorized, issued and outstanding shares of each
class of Capital Stock of the Borrower and each of its Subsidiaries and the
owners of such shares, and (iii) a summary of the direct and indirect
partnership, joint venture, or other equity interests, if any, of the
Borrower and each of its Subsidiaries in any Person that is not a
corporation. None of such issued and outstanding Capital Stock is subject to
any vesting, redemption, or repurchase agreement, and there are no warrants
or options outstanding with respect to such Capital Stock. The outstanding
Capital Stock of the Borrower and each of its Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable.
(e) NO CONFLICT. The execution, delivery and performance of each
of the Transaction Documents to which the Borrower or any of its Subsidiaries
is a party do not and will not (i) conflict with the Organizational Documents
of the Borrower or any such Subsidiary, (ii) constitute a tortious
interference with any Contractual Obligation of any Person or conflict with,
result in a breach of or constitute (with or without notice or lapse of
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time or both) a default under any Requirement of Law or Contractual
Obligation of the Borrower or any such Subsidiary, or require termination of
any Contractual Obligation, the consequences of which violation, breach,
default or termination, singly or in the aggregate, will have or is
reasonably likely to have a Material Adverse Effect or is reasonably likely
to subject the Lender to any liability, or (iii) result in or require the
creation or imposition of any Lien whatsoever upon any of the Property or
assets of the Borrower or any such Subsidiary, other than Liens contemplated
by the Loan Documents or the RCL Loan Documents, as applicable.
(f) PATENTS, TRADEMARKS, PERMITS, ETC.; GOVERNMENT APPROVALS. (i)
After giving effect to the Purchase and the Recoil Acquisition, the Borrower
and each of its Subsidiaries own, are licensed or otherwise have the lawful
right to use, or have all permits and other governmental approvals (except
with respect to Government Contracts), patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of their businesses as proposed to be conducted which are material to
their condition (financial or otherwise), operations, performance and
prospects, taken as a whole, including, without limitation, the names
"Microdot", "Kaynar", "Microdot Inserts" and "Recoil". With respect to each
Government Contract acquired by the Borrower or RCL in connection with the
Purchase or the Recoil Acquisition, such Government Contract has been
transferred to the Borrower or RCL (and all necessary approvals therefor have
been obtained) or the Borrower or RCL is operating under a subcontract which
is in full force and effect.
(ii) The consummation of the Purchase, the Recoil Acquisition and
the transactions contemplated by the Transaction Documents will not impair
the ownership of or rights under (or the license or other right to use, as
the case may be) any permits and governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how or processes by the Borrower or
any of its Subsidiaries in any manner which has or is reasonably likely to
have a Material Adverse Effect.
(g) PRO FORMA FINANCIALS. The PRO FORMA consolidated and
consolidating balance sheets of the Parent and its Subsidiaries prepared as
of March 31, 1996 (and giving effect to the Recoil Acquisition) and in
accordance with GAAP consistently applied, copies of which have been
furnished to the Lender on or before the Amendment and Restatement Effective
Date, fairly present on a PRO FORMA basis the financial condition of the
Parent and such Subsidiaries as of March 31, 1996, and reflect on a PRO FORMA
basis those liabilities reflected in the notes thereto and resulting from
consummation of the transactions contemplated by the Transaction Documents,
and the payment or accrual of all Transaction Costs payable on the Amendment
and Restatement Effective Date with respect to any of the foregoing. The
projections and assumptions expressed in the PRO FORMA
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financials furnished pursuant to this SECTION 5.01(g) are reasonable based on
the information available to the Borrower as of the date hereof.
(h) SOLVENCY. After giving effect to the Loans to be made on the
Amendment and Restatement Effective Date or such other date as Loans
requested hereunder are made, and the disbursement of the proceeds of such
Loans pursuant to the Borrower's instructions (if any), the Borrower and each
of its Subsidiaries are Solvent.
(i) THE PURCHASE. (i) All conditions precedent to, and all
consents necessary to permit, the Purchase pursuant to the Purchase Documents
have been satisfied or delivered, or waived with the prior written consent of
the Lender, and no material breach of any term or provision of any Purchase
Document has occurred and no action has been taken by any competent authority
which restrains, prevents or imposes material adverse conditions upon, or
seeks to restrain, prevent or impose material adverse conditions upon, the
Purchase or the making of any Loans hereunder.
(ii) After giving effect to the Purchase, the Borrower has
acquired substantially all of the assets of AFS pursuant to the AFS Purchase
Agreement, and, to the extent the assets of MAL have been made available in
accordance with the AFS Purchase Agreement, the Borrower and Kaynar U.K. have
acquired substantially all of the assets of MAL pursuant to the MAL Purchase
Agreement, in each case in compliance with all applicable laws.
(j) THE RECOIL ACQUISITION. (i) All conditions precedent to, and
all consents necessary to permit, the Recoil Acquisition pursuant to the
Recoil Acquisition Documents have been satisfied or delivered, or waived with
the prior written consent of the Lender, and no material breach of any term
or provision of any Recoil Acquisition Document has occurred and no action
has been taken by any competent authority which restrains, prevents or
imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, the Recoil Acquisition or the making
of any Loans hereunder.
(ii) After giving effect to the Recoil Acquisition, the Borrower
has acquired substantially all of the assets of Recoil U.S. pursuant to the
Recoil U.S. Acquisition Agreement, and the Borrower, RCL and, if designated
by the Borrower to acquire the shares of Recoil U.K., Kaynar U.K. have
acquired substantially all of the assets of Recoil Australia pursuant to the
Recoil Australia Acquisition Agreement and related documents, in each case in
compliance with all applicable Requirements of Law.
(k) PLEDGE OF COLLATERAL. The grant and perfection of the security
interest in the Capital Stock of the Subsidiaries of
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the Borrower constituting a portion of the Collateral for the benefit of the
Lender, as contemplated by the terms of the Loan Documents, is not made in
violation of the registration provisions of the Securities Act, any
applicable provisions of other federal securities laws, state securities or
"Blue Sky" law, foreign securities law, or applicable general corporation,
limited liability company, unlimited liability company or partnership law or
in violation of any other Requirement of Law.
(l) GOVERNMENTAL REGULATION. Neither the Borrower, nor any of its
Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or
the Investment Company Act of 1940, or any other foreign, federal or state
statute or regulation which limits its ability to incur indebtedness or its
ability to consummate the transactions contemplated hereby, by the Purchase
Agreements or by the Recoil Acquisition Agreements.
(m) RESTRICTED JUNIOR PAYMENTS. Since the date of the Borrower's
incorporation, neither the Borrower nor any of its Subsidiaries (other than
Recoil Belgium and Recoil U.K.) has directly or indirectly declared, ordered,
paid or made or set apart any sum or Property for any Restricted Junior
Payment or agreed to do so, except as permitted pursuant to SECTION 8.06.
Since the Amendment and Restatement Effective Date, none of Recoil Belgium or
Recoil U.K. has directly or indirectly declared, ordered, paid or made or set
apart any sum or Property for any Restricted Junior Payment or agreed to do
so, except as permitted pursuant to SECTION 8.06
(n) BANK ACCOUNTS. Each bank, trust company or other financial
institution at which the Borrower or any of its Subsidiaries maintains any
deposit account (except for disbursement accounts into which no funds are
deposited other than (i) proceeds of Revolving Loans or (ii) transfers from
other disbursement accounts into which only proceeds of Revolving Loans are
deposited) has executed and delivered to the Lender a Collection Account
Agreement with respect to such deposit account(s).
(o) LITIGATION; ADVERSE EFFECTS. Except as set forth in
SCHEDULE 5.01-O, there is no action, suit, proceeding, investigation or
arbitration before or by any Governmental Authority or private arbitrator
pending or, to the best of Borrower's knowledge, threatened against the Borrower
or any of its Subsidiaries or any Property of any of them (i) challenging the
validity or the enforceability of any of the Transaction Documents or (ii) which
will or is reasonably likely to result in any Material Adverse Effect. There is
no material loss contingency within the meaning of GAAP which has not been
reflected in the consolidated financial statements of the Borrower. Neither the
Borrower nor any of its Subsidiaries is (x) in violation of any applicable
Requirements of Law which violation will have or is reasonably likely to have a
Material
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Adverse Effect, or (y) subject to or in default with respect to any final
judgment, writ, injunction, restraining order or order of any nature, decree,
rule or regulation of any court or Governmental Authority which will have or
is reasonably likely to have a Material Adverse Effect.
(p) NO MATERIAL ADVERSE CHANGE. Since the Initial Closing Date,
there has occurred no event which has had or is reasonably likely to have a
Material Adverse Effect.
(q) PERFORMANCE. Neither the Borrower nor any of its Subsidiaries
has received notice or has actual knowledge that (i) it is in default in the
performance, observance or fulfillment of any of the material obligations,
covenants or conditions contained in any Contractual Obligation applicable to
it, or (ii) any condition exists which, with the giving of notice or the
lapse of time or both, would constitute a default with respect to any such
Contractual Obligation.
(r) DISCLOSURE. The representations and warranties of the
Borrower and its Subsidiaries contained in the Transaction Documents, and all
certificates and other documents delivered to the Lender pursuant to the
terms thereof, do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were made,
not misleading. The Borrower has not intentionally withheld any fact from
the Lender in regard to any matter which will have or is reasonably likely to
have a Material Adverse Effect.
(s) REQUIREMENTS OF LAW. The Borrower and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably likely to have a
Material Adverse Effect.
(t) ENVIRONMENTAL MATTERS. (i) After giving effect to the
Purchase and the Recoil Acquisition, except as disclosed on SCHEDULE 5.01-T:
(A) the operations of the Borrower and its Subsidiaries comply in
all material respects with all applicable Environmental Laws;
(B) the Borrower and each of its Subsidiaries have obtained all
environmental, health and safety Permits necessary for their respective
operations, and all such Permits are in good standing and the Borrower and
each of its Subsidiaries are currently in material compliance with all terms
and conditions of such Permits;
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(C) none of the Borrower or its Subsidiaries or any of their
respective present or, to the Borrower's knowledge, past Property or
operations are subject to or the subject of any investigation by, order from
or agreement or negotiations with any Person (including without limitation
any prior owner or operator of the Borrower or its Subsidiaries and/or such
Property) respecting (I) any Environmental Law, (II) any Remedial Action or
(III) any Claims or Liabilities and Costs arising from the Release or
threatened Release of a Contaminant;
(D) none of the operations of the Borrower or its Subsidiaries is
subject to any judicial or administrative proceeding, order, judgment, decree
or settlement alleging or addressing a violation of or a liability under any
Environmental Law;
(E) neither the Borrower nor any of its Subsidiaries have filed any
notice under any applicable Requirement of Law:
(I) reporting a Release of a Contaminant;
(II) indicating past or present treatment, storage or disposal
of a hazardous waste, as that term is defined under 40 C.F.R. Part 261
or any state equivalent; or
(III) reporting a violation of any applicable Environmental Law.
(F) none of the Borrower's or its Subsidiaries' present or, to the
Borrower's knowledge, past Property is listed or proposed for listing on the
National Priorities List ("NPL") pursuant to CERCLA or on the Comprehensive
Environmental Response Compensation Liability Information System List
("CERCLIS") or any similar state list of sites requiring Remedial Action;
(G) to the Borrower's knowledge, neither the Borrower nor its
Subsidiaries have sent or directly arranged for the transport of any waste to
any NPL site or a proposed NPL site or to a CERCLIS site;
(H) there is not now, nor (to the Borrower's knowledge) has there
ever been on or in the Property:
(I) any generation, treatment, recycling, storage or disposal of
any hazardous waste, as that term is defined under 40 C.F.R. Part 261
or any state equivalent;
(II) any landfill, waste pile, underground storage tank or
surface impoundment;
(III) any asbestos-containing material; or
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(IV) a Release of any PCB used in hydraulic oils, electrical
transformers or other Equipment;
which, in each case or in the aggregate, is reasonably likely to result in a
Material Adverse Effect;
(I) neither the Borrower nor any of its Subsidiaries have received
any notice or Claim to the effect that any of such Persons has or may reasonably
be expected to have Liability and Costs in excess of $250,000, in the aggregate,
as a result of the Release or threatened Release of a Contaminant;
(J) there have been no Releases of any Contaminants from any Property
which (I) require Remedial Action to be undertaken and where such Remedial
Action is subject to review or approval by any Governmental Authority or (II)
which would require a report to be made to any Governmental Authority;
(K) neither the Borrower nor any of its Subsidiaries have any
contingent liability in connection with any Release or threatened Release of any
Contaminants which is reasonably likely to result in a Material Adverse Effect;
(L) no Environmental Lien has attached to any Property of the
Borrower or its Subsidiaries; and
(M) none of the Property of the Borrower or its Subsidiaries is
subject to any Environmental Property Transfer Act, or to the extent such acts
are applicable to any such Property, the Borrower and its Subsidiaries have
complied with the requirements of such acts in all material respects.
(ii) The Borrower and its Subsidiaries are conducting and will
continue to conduct their respective businesses and operations in an
environmentally responsible manner and in material compliance with Environmental
Laws, and the Borrower and its Subsidiaries, taken as a whole, have not been,
and have no reason to believe that they shall be, subject to Liabilities and
Costs arising out of or relating to environmental, health or safety matters that
have or will result in a Material Adverse Effect.
(u) ERISA. Neither the Borrower nor any ERISA Affiliate maintains
or contributes to any Benefit Plan, Multiemployer Plan or Foreign Pension
Plan other than those listed on SCHEDULE 5.01-U hereto. Except with respect
to new Plans for which the remedial amendment period under Section 401(b) of
the Internal Revenue Code has not expired, each Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code as currently in
effect has been determined by the IRS to be so qualified, and each trust
related to any such Plan has been determined to be exempt from federal income
tax under Section 501(a) of the Internal Revenue Code as currently in effect.
Except as disclosed in SCHEDULE 5.01-U, neither the Borrower nor
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any of its Subsidiaries maintains or contributes to any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA which provides
benefits to employees after termination of employment other than as required
by Section 601 of ERISA. The Borrower and all its Subsidiaries are in
compliance in all material respects with the responsibilities, obligations
and duties imposed on them by ERISA, the Internal Revenue Code and
regulations promulgated thereunder with respect to all Plans. No Benefit Plan
has incurred any accumulated funding deficiency (as defined in Sections
302(a)(2) of ERISA and 412(a) of the Internal Revenue Code) whether or not
waived. Neither the Borrower nor any of its Subsidiaries nor any fiduciary
of any Plan which is not a Multiemployer Plan (i) has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the
Internal Revenue Code or (ii) has taken or failed to take any action which
would constitute or result in a Termination Event. Neither the Borrower nor
any ERISA Affiliate is subject to any liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA. Neither the Borrower nor any ERISA Affiliate
has incurred any liability to the PBGC which remains outstanding other than
the payment of premiums, and there are no premium payments which have become
due which are unpaid. Schedule B to the most recent annual report filed with
the IRS with respect to each Benefit Plan and furnished to the Lender is
complete and accurate. Since the date of each such Schedule B, there has
been no material adverse change in the funding status or financial condition
of the Benefit Plan relating to such Schedule B. Neither the Borrower nor
any ERISA Affiliate has (x) failed to make a required contribution or payment
to a Multiemployer Plan or (y) made a complete or partial withdrawal under
Sections 4203 or 4205 of ERISA from a Multiemployer Plan. Neither the
Borrower nor any ERISA Affiliate has failed to make a required installment or
any other required payment under Section 412 of the Internal Revenue Code on
or before the due date for such installment or other payment. Neither the
Borrower nor any ERISA Affiliate is required to provide security to a Benefit
Plan under Section 401(a)(29) of the Internal Revenue Code due to a Plan
amendment that results in an increase in current liability for the plan year.
Except as disclosed on SCHEDULE 5.01-U, neither the Borrower nor any of its
Subsidiaries has, by reason of the transactions contemplated hereby, any
obligation to make any payment to any employee pursuant to any Plan or
existing contract or arrangement. The Borrower has given to the Lender
copies of all of the following: each Benefit Plan and related trust
agreement (including all amendments to such Plan and trust) in existence or
committed to as of the Amendment and Restatement Effective Date and in
respect of which the Borrower or any ERISA Affiliate is currently an
"employer" as defined in section 3(5) of ERISA, and the most recent summary
plan description, actuarial report, determination letter issued by the IRS
and Form 5500 filed in respect of each such Benefit Plan in existence; a
listing of all of the Multiemployer Plans currently contributed to by the
Borrower or any ERISA Affiliate with the aggregate amount of the most recent
annual contributions required to be
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made by the Borrower and all ERISA Affiliates to each such Multiemployer
Plan, any information which has been provided to the Borrower or an ERISA
Affiliate regarding withdrawal liability under any Multiemployer Plan and the
collective bargaining agreement pursuant to which such contribution is
required to be made; and as to each employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides benefits to employees of the
Borrower or any of its Subsidiaries after termination of employment other
than as required by Section 601 of ERISA, the most recent summary plan
description for such plan and the aggregate amount of the most recent annual
payments made to terminated employees under each such plan.
(v) FOREIGN EMPLOYEE BENEFIT MATTERS. Each Foreign Employee Benefit
Plan is in compliance in all material respects with all laws, regulations and
rules applicable thereto and the respective requirements of the governing
documents for such Plan. The aggregate of the liabilities to provide all of the
accrued benefits under any Foreign Pension Plan does not exceed the current Fair
Market Value of the assets held in the trust or other funding vehicle for such
Plan. With respect to any Foreign Employee Benefit Plan maintained or
contributed to by the Borrower, any of its Subsidiaries or any ERISA Affiliate
(other than a Foreign Pension Plan), reasonable reserves have been established
to the extent required by prudent business practice or where required by
ordinary accounting practices in the jurisdiction in which such Plan is
maintained. The aggregate unfunded liabilities, after giving effect to any
reserves for such liabilities, with respect to such Plans does not exceed the
current Fair Market Value of the assets held in the trust or other funding
vehicle (or reserves) for such Plan. There are no actions, suits or claims
(other than routine claims for benefits) pending or threatened against the
Borrower, any of its Subsidiaries or any ERISA Affiliate with respect to any
Foreign Employee Benefit Plan.
(w) LABOR MATTERS. SCHEDULE 5.01-W accurately sets forth all labor
contracts to which the Borrower or any of its Subsidiaries is a party on the
date hereof and the expiration date of each such contract. There are no
strikes, lockouts or other disputes relating to any collective bargaining or
similar agreement to which the Borrower or any of its Subsidiaries is a party.
(x) INSURANCE. SCHEDULE 5.01-X accurately sets forth as of the date
delivered to the Lender all insurance policies and programs currently in effect
with respect to the respective Property and assets and business of the Borrower
and its Subsidiaries, specifying for each such policy and program, (i) the
amount thereof, (ii) the risks insured against thereby, (iii) the name of the
insurer and each insured party thereunder, (iv) the policy or other
identification number thereof, (v) the expiration date thereof and (vi) the
annual premium with respect thereto. Such insurance policies and programs are
in amounts
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sufficient to cover the replacement value of the respective Property and
assets of the Borrower and its Subsidiaries.
(y) GOVERNMENT CONTRACT MATTERS. Except as set forth in SCHEDULE
5.01-Y:
(i) The Borrower is in compliance with all material terms and
conditions of all Government Contracts, including all clauses, provisions
and requirements incorporated expressly, by reference or by operation of
law therein;
(ii) The Borrower is in compliance with all material terms and
conditions of all Requirements of Law and all Contractual Obligations
pertaining to any Government Contract;
(iii) All representations and certifications executed or acknowledged
or set forth in or pertaining to each Government Contract were complete,
accurate, correct and truthful as of the date such representations or
certifications were made, and the Borrower has complied in all material
respects with all such representations and certifications since such date;
(iv) None of the DOD, any other United States Governmental Authority,
any prime contractor, subcontractor or other Person has notified the
Borrower or any of its Subsidiaries that the Borrower or such Subsidiary
has breached or violated any Requirement of Law, certification,
representation, clause, provision or requirement pertaining to any
Government Contract;
(v) No termination for default, termination for convenience, cure
notice or show cause notice is currently in effect with respect to any
Government Contract;
(vi) To the best of the Borrower's knowledge, no cost incurred
pertaining to any Government Contract has been questioned or challenged, is
the subject of any investigation or has been disallowed by any United
States Governmental Authority;
(vii) To the best of the Borrower's knowledge, no money due to the
Borrower or any of its Subsidiaries pertaining to any Government Contract
has been withheld, or has been the subject of an attempt to withhold, or
reduced through exercise of a right of set-off or otherwise;
(viii) There is no action, suit, investigation or proceeding relating
to any Government Contract, or relating to any proposed suspension or
debarment of the Borrower, any of its Subsidiaries or any of their
respective employees or agents, pending against (or, to the best of the
Borrower's
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knowledge, threatened against) the Borrower, such Subsidiary, such other
Person or any Property;
(ix) Neither the Borrower, any of its Subsidiaries or any of
their respective directors, officer or employees is (or during the
last five (5) years has been) suspended or debarred from doing
business with the United States or any Governmental Authority therein
or is (or during such period was) the subject of a finding of
nonresponsibility or ineligibility for United States government
contracting;
(x) (A) To the best of the Borrower's knowledge, none of the
Borrower's or any of its Subsidiaries' respective directors, officers,
employees, consultants or agents is (or during the last five (5) years has
been) under administrative, civil or criminal investigation, indictment or
information by any Governmental Authority with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract, (B) during the last five (5) years, the Borrower has
not conducted or initiated any internal investigation or audit or made a
voluntary disclosure to any United States Governmental Authority, with
respect to any alleged irregularity, misstatement or omission arising under
or related to any Government Contract; and (C) the Borrower has no
knowledge or reason to know of any irregularity, misstatement or omission
arising under or relating to any Government Contract that has led or could
reasonably lead, either before or after the Amendment and Restatement
Effective Date, to any of the consequences set forth in CLAUSE (A) or (B)
above or any other material damage, penalty assessment, recoupment of
payment or disallowance of cost;
(xi) There exist (A) no outstanding material Claims against the
Borrower, its Subsidiaries or any Property, either by a United States
Governmental Authority or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Government Contract;
and (B) no material disputes between the Borrower or any of its
Subsidiaries, on the one hand, and any United States Governmental
Authority, any prime contractor, subcontractor, vendor or other third
party, on the other hand, arising under or relating to any Government
Contract;
(xii) The Borrower's cost accounting and procurement systems with
respect to Government Contracts are in compliance in all material respects
with all applicable Requirements of Law; and
(xiii) All Government Contracts and bids (A) are being performed or
were submitted, as the case may be, in the ordinary course of business and
(B) are or would be, as the case may be, capable of performance in
accordance with their
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terms without loss (determined in accordance with the Borrower's accounting
principles, consistently applied).
(z) PAYMENT OF TAXES. All tax returns and reports of each of the
Borrower and its Subsidiaries required to be filed have been timely filed, and
all taxes, assessments, fees and other governmental charges thereupon and upon
their respective Property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid, other than those which
are being contested in good faith by appropriate proceedings. The Borrower has
no knowledge of any proposed tax assessment (or similar claim) against the
Borrower or any of its Subsidiaries that will have or is reasonably likely to
have a Material Adverse Effect.
(aa) ELIGIBLE ACCOUNTS. From and after the Amendment and Restatement
Effective Date, the Eligible Accounts are, as of the date as of which any
Revolving Loan is made or requested or any Letter of Credit is issued hereunder
or a Borrowing Base Certificate is delivered, bona fide existing obligations
created by the sale and delivery of Inventory or the rendition of services to
Account Debtors in the ordinary course of the Borrower's business,
unconditionally owed to the Borrower without defenses, disputes, offsets,
counterclaims or rights of return other than in the ordinary course of business.
The property giving rise to such Eligible Accounts has been delivered to the
Account Debtor, or to the Account Debtor's agent for immediate shipment to and
unconditional acceptance by the Account Debtor. The Borrower has not received
notice of actual or imminent bankruptcy, insolvency, or the material impairment
of the financial condition of any Account Debtor at the time an Eligible Account
due from such Account Debtor is created or first included in the Borrowing Base.
ARTICLE VI
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
6.01. FINANCIAL STATEMENTS. The Borrower shall maintain, and cause
each of its Subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating financial statements in conformity with GAAP,
and each of the financial statements described below shall be prepared from such
system and records. The Borrower shall deliver or cause to be delivered to the
Lender:
(a) MONTHLY REPORTS. As soon as practicable, and in any event within
thirty (30) days after the end of each calendar
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month in each Fiscal Year, the consolidated and consolidating balance sheets
of the Borrower and its Subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income, stockholders'
equity and cash flow of the Borrower and its Subsidiaries for such calendar
month and for the period from the beginning of the then current Fiscal Year
to the end of such calendar month, setting forth in each case in comparative
form the corresponding figures for the corresponding calendar periods in the
previous Fiscal Year and the corresponding figures from the consolidated
financial forecast for the current Fiscal Year delivered pursuant to SECTION
6.01(f), certified by the chief financial officer of the Borrower as fairly
presenting the consolidated and consolidating financial position of the
Borrower and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the calendar months indicated in
accordance with GAAP, subject to normal year end adjustments.
(b) QUARTERLY REPORTS. As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each Fiscal
Year, the consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such fiscal quarter and for the period from
the beginning of the then current Fiscal Year to the end of such fiscal quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the consolidated financial forecast for the current Fiscal Year delivered
pursuant to SECTION 6.01(f), certified by the chief financial officer of the
Borrower as fairly presenting the consolidated and consolidating financial
position of the Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
accordance with GAAP, subject to normal year end adjustments.
(c) ANNUAL REPORTS. As soon as practicable, and in any event within
one hundred twenty (120) days after the end of each Fiscal Year, (i) the
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such Fiscal Year and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and its Subsidiaries for such Fiscal Year, setting forth in each case
in comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered pursuant to SECTION 6.01(f), and (ii) a report
thereon of Arthur Andersen & Co. or other independent certified public
accountants of recognized standing and otherwise acceptable to the Lender, which
report shall be unqualified and shall state that such financial statements
fairly present the consolidated and consolidating financial position of each of
the Borrower and
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its Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for changes with which
Arthur Andersen & Co. or any such other independent certified public
accountants, if applicable, shall concur and which shall have been disclosed
in the notes to the financial statements) and that the examination by such
accountants in connection with such consolidated and consolidating financial
statements has been made in accordance with generally accepted auditing
standards.
(d) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement pursuant to PARAGRAPHS (b) and (c) of this SECTION 6.01, (i)
an Officer's Certificate of the Borrower substantially in the form of EXHIBIT K
attached hereto and made a part hereof, stating that the officer signatory
thereto has reviewed the terms of the Loan Documents, and has made, or caused to
be made under his supervision, a review in reasonable detail of the transactions
and consolidated and consolidating financial condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements,
that such review has not disclosed the existence during or at the end of such
accounting period, and that such officer does not have knowledge of the
existence as at the date of such Officer's Certificate, of any condition or
event which constitutes an Event of Default or Potential Event of Default, or,
if any such condition or event existed or exists, specifying the nature and
period of existence thereof and what action the Borrower or any of its
Subsidiaries has taken, is taking and proposes to take with respect thereto; and
(ii) a certificate (the "Compliance Certificate"), signed by the Borrower's
chief financial officer, setting forth calculations and the methods of
determination thereof (with such specificity as the Lender may reasonably
request) for the period then ended which demonstrate compliance, when
applicable, with the provisions of ARTICLE IX.
(e) ACCOUNTANT'S STATEMENT AND PRIVITY LETTER. Together with each
delivery of the financial statements referred to in SECTION 6.01(c), a
written statement of the firm of independent certified public accountants
giving the report thereon (i) stating that their audit examination has
included a review of the terms of this Agreement as it relates to accounting
matters, (ii) stating whether, in connection with their audit examination,
any condition or event which constitutes an Event of Default or Potential
Event of Default has come to their attention, and if such condition or event
has come to their attention, specifying the nature and period of existence
thereof; PROVIDED, that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such condition or event that would not be
disclosed in the course of their audit examination, and (iii) stating that
based on their audit examination nothing has come to their attention which
causes them to believe that the information contained in either or both of
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the certificates delivered therewith pursuant to SECTION 6.01(d) is not
correct or that the matters set forth in the Compliance Certificate delivered
therewith pursuant to SECTION 6.01(d)(ii) for the applicable Fiscal Year are
not stated in accordance with the terms of this Agreement. The statement
referred to above shall be accompanied by (x) a copy of the management letter
or any similar report delivered to the Borrower or to any officer or employee
thereof by such accountants in connection with such financial statements and
(y) a letter from the Borrower to such accountants informing such accountants
that the Lender is relying upon the financial statements audited by such
accountants and delivered to the Lender pursuant to SECTION 6.01(c) and that
a primary intent of the Borrower in having such financial statements audited
is to induce the Lender to continue to make Loans to the Borrower under this
Agreement. The Lender may, with the consent of the Borrower (which consent
shall not be unreasonably withheld), communicate directly with such
accountants.
(f) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than thirty (30) days prior to the
commencement of each Fiscal Year of the Borrower, (i) a monthly budget for
such Fiscal Year; (ii) an annual business plan for such Fiscal Year, in form
and substance acceptable to the Lender, accompanied by a report reconciling
all changes and departures from the business plan delivered to the Lender for
the preceding Fiscal Year; and (iii) a consolidated plan and financial
forecast, prepared in accordance with the Borrower's normal accounting
procedures applied on a consistent basis, for such Fiscal Year and the two
(2) immediately succeeding Fiscal Years, including, without limitation, (A) a
forecasted consolidated balance sheet and a consolidated statement of changes
in financial position of the Borrower for such Fiscal Years, (B) forecasted
consolidated balance sheets, statements of earnings and retained earnings,
and changes in financial position of the Borrower for and as of the end of
each fiscal quarter of such Fiscal Years, (C) the amount of forecasted
Capital Expenditures and Excess Cash Flow for such Fiscal Years, and (D)
forecasted compliance with the provisions of ARTICLE IX for such Fiscal Years.
(g) BORROWING BASE CERTIFICATE. As soon as practicable and in any
event not less than fifteen (15) calendar days after the end of each monthly
accounting period of the Borrower and, additionally, promptly upon request, a
Borrowing Base Certificate as at the last day of such accounting period (or
as at the date of such request).
6.02. OPERATIONS REPORTS. Accompanying the reports to be delivered
by the Borrower each fiscal quarter in each Fiscal Year pursuant to SECTION
6.01(b) and, in addition to the foregoing, within seven (7) days after the
Lender's request therefor, the Borrower shall deliver to the Lender a report
detailing the operations of the Borrower and its Subsidiaries
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which report shall include a management discussion and analysis with respect
to the Borrower's and its Subsidiaries' financial performance during such
period, including a comparison of actual sales versus budgeted sales for such
fiscal quarter, a discussion of bookings, a listing of significant new
customers and new products developed for sale, an explanation of any cost
saving measures implemented, together with a discussion of the general
business environment and results of operations, including an explanation of
any material changes in consolidated and consolidating statements of income,
stockholders' equity and cash flow of the Borrower and its Subsidiaries for
such period from such statements for the corresponding period of the previous
Fiscal Year and the corresponding figures from the consolidated financial
forecast for the current Fiscal Year pursuant to SECTION 6.01(f) (the
"Management Discussion and Analysis").
6.03. COLLATERAL REPORTING. (a) Upon the request of the Lender,
the Borrower shall deliver to the Lender, in form and substance acceptable to
the Lender, a summary aged trial balance of all then existing Accounts
specifying the names, addresses, face amount and dates of invoices for each
Account the Borrower obligated on an Account so listed ("Schedule of
Accounts"), and upon demand, the original or copies, as request, of all
documents, including, without limitation, proofs of delivery, repayment
histories and present status reports, relating to the Accounts so scheduled
and such other matters and information relating to the status of Accounts as
the Lender shall reasonably request.
(b) Promptly upon, but in no event later than ten (10) Business
Days after, the Borrower's learning thereof, inform the Lender, in writing,
of (i) any material delay in the Borrower's performance of any of its
obligations to any material Account Debtor and of any assertion of any
material claims, offsets or counterclaims by any Account Debtor and of any
material allowances, credits or other monies granted by the Borrower to any
Account Debtor, and (ii) all material adverse information relating to the
financial condition of any material Account Debtor.
(c) Upon the request of the Lender, the Borrower shall deliver to
Lender, in form and substance acceptable to the Lender, a report summarizing,
on a LIFO and FIFO basis, the kind, type, quality and quantity of Inventory
as of the end of such month, the Borrower's cost therefor, and summaries of
Inventory by categories or classifications and by location.
(d) The Borrower shall provide the Lender with copies of all
agreements between the Borrower and any warehouse at which Inventory may from
time to time be kept and all leases or similar agreements between the
Borrower or any of its Affiliates and any other Person, whether the Borrower
or its Affiliate is lessor or lessee thereunder.
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6.04. EVENTS OF DEFAULT. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Borrower obtaining knowledge (a) of any condition or event
which constitutes an Event of Default or Potential Event of Default, or becoming
aware that the Lender has given any notice with respect to a claimed Event of
Default or Potential Event of Default under this Agreement, (b) that any Person
has given any notice to the Borrower or any Subsidiary of the Borrower or taken
any other action with respect to a claimed default or event or condition of the
type referred to in SECTION 10.01(e), or (c) of any condition or event which has
or is reasonably likely to have a Material Adverse Effect or affect the value
of, or the Lender's interest in, Collateral with a value in excess of $500,000
in any material respect, the Borrower shall deliver to the Lender an Officer's
Certificate specifying (A) the nature and period of existence of any such
claimed default, Event of Default, Potential Event of Default, condition or
event, (B) the notice given or action taken by such Person in connection
therewith, and (C) what action the Borrower has taken, is taking and proposes to
take with respect thereto.
6.05. LAWSUITS. (a) Promptly upon the Borrower obtaining knowledge
of the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Borrower or
any of its Subsidiaries or any Property of the Borrower or any of its
Subsidiaries not previously disclosed pursuant to SECTION 5.01(o), which action,
suit, proceeding, governmental investigation or arbitration exposes, or in the
case of multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances which
expose, in the Borrower's reasonable judgment, the Borrower or any of its
Subsidiaries to liability in an amount aggregating $100,000 or more (exclusive
of claims covered by insurance policies of the Borrower or any of its
Subsidiaries unless the insurers of such claims have disclaimed coverage or
reserved the right to disclaim coverage on such claims), the Borrower shall give
written notice thereof to the Lender and provide such other information as may
be reasonably available to enable the Lender and its counsel to evaluate such
matters; (b) as soon as practicable and in any event within forty-five (45) days
after the end of each fiscal quarter of the Borrower, the Borrower shall provide
a written quarterly report to the Lender covering the institution of, or written
threat of, any action, suit, proceeding, governmental investigation or
arbitration (not previously reported) against or affecting the Borrower or any
of its Subsidiaries or any Property of the Borrower or any of its Subsidiaries
not previously disclosed by the Borrower to the Lender, and shall provide such
other information at such time as may be reasonably available to enable the
Lender and its counsel to evaluate such matters (but excluding such information
at to which the Borrower in good faith has asserted or will assert a legal
privilege in objection to
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disclosure of the information by the Borrower in the action, suit,
proceeding, investigation or arbitration); and (c) in addition to the
requirements set forth in CLAUSES (a) and (b) of this SECTION 6.05, the
Borrower upon request of the Lender shall promptly give written notice of the
status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered pursuant to CLAUSE (a) or (b) above
and provide such other information as may be reasonably available to it to
enable the Lender and its counsel to evaluate such matters.
6.06. INSURANCE. As soon as practicable and in any event by the last
day of April in each Fiscal Year, the Borrower shall deliver to the Lender (a)
a report in form and substance reasonably satisfactory to the Lender outlining
all material insurance coverage maintained as of the date of such report by the
Borrower and its Subsidiaries and the duration of such coverage and (b) evidence
that all premiums with respect to such coverage have been paid when due.
6.07. ERISA NOTICES. The Borrower shall deliver or cause to be
delivered to the Lender, at the Borrower's expense, the following information
and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer of
the Borrower describing such Termination Event and the action, if any,
which the Borrower or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto, and when known, any action
taken or threatened by the IRS, DOL or PBGC with respect thereto;
(b) within ten (10) Business Days after the Borrower or any of
its Subsidiaries knows or has reason to know that an assessment of a
prohibited transaction excise tax under Section 4975 of the Internal
Revenue Code has occurred, a statement of the chief financial officer
of the Borrower describing such transaction and the action which the
Borrower or any ERISA Affiliate has taken, is taking or proposes to
take with respect thereto;
(c) upon the request of the Lender, copies of each annual report
(form 5500 series), including Schedule B thereto, filed with the DOL,
IRS or PBGC with respect to each Benefit Plan;
(d) within ten (10) Business Days after the filing of the same
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan
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and all communications received by the Borrower or any ERISA
Affiliate with respect to such request;
(e) within ten (10) Business Days after the occurrence any
material increase in the benefits of any existing Benefit Plan or the
establishment of any new Benefit Plan or the commencement of
contributions to any Benefit Plan to which the Borrower or any ERISA
Affiliate was not previously contributing, notification of such
increase, establishment or commencement;
(f) within three (3) Business Days after the Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice;
(g) within ten (10) Business Days after the Borrower or any of
its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Internal Revenue Code, copies of each such
letter;
(h) within ten (10) Business Days after the Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding
the imposition of withdrawal liability, copies of each such notice;
(i) within three (3) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other
required payment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or payment, a notification of
such failure;
(j) within ten (10) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know (A) a Multiemployer Plan
has been terminated, (B) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (C)
the PBGC has instituted or will institute proceedings under Section
4042 of ERISA to terminate a Multiemployer Plan; and
(k) within ten (10) Business Days after the Borrower receives
written notice from the Lender requesting the same, copies of any
Foreign Employee Benefit Plan and related documents, reports and
correspondence specified in such notice.
For purposes of this SECTION 6.07, the Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the
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Administrator of any Plan of which the Borrower or any ERISA Affiliate is the
plan sponsor.
6.08. ENVIRONMENTAL NOTICES. (a) The Borrower shall notify the
Lender in writing, within five (5) days after the Borrower's learning thereof,
of any:
(i) notice or claim to the effect that the Borrower or any of
its Subsidiaries is or can reasonably be expected to be liable to any
Person as a result of the Release or threatened Release of any
Contaminant;
(ii) notice that the Borrower or any of its Subsidiaries is
subject to investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to the Release or
threatened Release of any Contaminant;
(iii) notice that any Property of the Borrower or any of its
Subsidiaries is subject to an Environmental Lien;
(iv) notice of violation to the Borrower or any of its
Subsidiaries of any Environmental Law;
(v) condition which might reasonably result in a violation of
any Environmental Law;
(vi) commencement or threat of any judicial or administrative
proceeding alleging a violation by the Borrower or any of its
Subsidiaries of any Environmental Law;
(vii) new or proposed changes to any existing Environmental Law
that could result in a Material Adverse Effect;
(viii) any Release of a Contaminant which requires, or is
reasonably likely to require, (A) Remedial Action which is subject to
review or approval by any Governmental Authority or (B) reporting to
any Governmental Authority; or
(ix) any proposed acquisition of stock, assets, real estate, or
leasing of property, or any other action by the Borrower or any of its
Subsidiaries that is reasonably likely to subject the Borrower or any
of its Subsidiaries to environmental, health or safety Liabilities and
Costs.
(b) Within forty-five (45) days after the end of each Fiscal Year,
the Borrower shall submit to the Lender a report summarizing the status of
environmental, health or safety
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compliance, hazard or liability issues identified in notices required
pursuant to SECTION 6.08(a), disclosed on SCHEDULE 5.01-T or identified in
any notice or report required herein.
6.09. LABOR MATTERS. The Borrower shall notify the Lender in
writing, promptly upon the Borrower's learning thereof, of (a) any material
labor dispute to which the Borrower or any of its Subsidiaries may become a
party, including, without limitation, any strikes, lockouts or other disputes
relating to such Persons' plants and other facilities and (b) any liability
incurred with respect to the closing of any plant or other facility of the
Borrower or any of its Subsidiaries.
6.10. GOVERNMENT CONTRACT NOTICES. The Borrower shall notify the
Lender in writing, within three (3) Business Days after the Borrower's learning
thereof, of any of the following:
(a) The DOD, any other United States Governmental Authority, any
prime contractor, subcontractor or other Person has notified the Borrower
or any of its Subsidiaries that the Borrower or such Subsidiary has
breached or violated in any material respect any Requirement of Law,
certification, representation, clause, provision or requirement pertaining
to any Government Contract;
(b) A termination for default, termination for convenience, cure
notice or show cause notice is in effect with respect to any Government
Contract;
(c) Any cost incurred pertaining to any Government Contract has been
questioned or challenged, is the subject of any investigation or has been
disallowed by any United States Governmental Authority;
(d) Any money due to the Borrower or any of its Subsidiaries
pertaining to any Government Contact is withheld, or is the subject of an
attempt to withhold, or is reduced through exercise of a right of set-off
or otherwise;
(e) The commencement or threat of any action, suit, investigation or
proceeding relating to any Government Contact, or relating to any proposed
suspension or debarment of the Borrower, any of its Subsidiaries or any of
their respective employees or agents, against the Borrower, such
Subsidiary, such other Person or any Property;
(f) The discovery of any irregularity, misstatement or omission
arising under or relating to any Government Contract that could reasonably
be expected to lead to (i) an administrative, civil or criminal
investigation, indictment or information with respect to the Borrower, any
of its Subsidiaries or any of their respective directors, officers,
employees, consultants or agents, (ii) disclosure of such irregularity,
misstatement or omission to any Governmental
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Authority or (iii) material damage, penalty assessment, recoupment of
payment or disallowance of cost; or
(g) The existence of (i) any outstanding material Claims against the
Borrower, its Subsidiaries or any Property, either by a United States
Governmental Authority or by any prime contractor, subcontractor, vendor or
other third party, arising under or relating to any Government Contract, or
(ii) any material dispute between the Borrower or any of its Subsidiaries,
on the one hand, and any United States Governmental Authority, any prime
contractor, subcontractor, vendor or other third party, on the other hand,
arising under or relating to any Government Contract.
6.11. OTHER INFORMATION. Promptly upon receiving a request therefor
from the Lender, the Borrower shall prepare and deliver to the Lender such other
information with respect to the Borrower, any of its Subsidiaries, or the
Collateral, including, without limitation, schedules identifying and describing
the Collateral and any dispositions thereof, as from time to time may be
reasonably requested by the Lender.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent:
7.01. ORGANIZATIONAL EXISTENCE, ETC. Except as permitted by SECTION
8.09, the Borrower shall, and shall cause each of its Subsidiaries to, at all
times maintain its organizational existence and preserve and keep, or cause to
be preserved and kept, in full force and effect its rights and franchises
material to its businesses, except where the loss or termination of such rights
and franchises is not likely to have a Material Adverse Effect.
7.02. ORGANIZATIONAL POWERS; CONDUCT OF BUSINESS. The Borrower
shall, and shall cause each of its Subsidiaries to qualify and remain qualified
to do business in each jurisdiction in which the nature of its business requires
it to be so qualified.
7.03. COMPLIANCE WITH LAWS, ETC. The Borrower shall, and shall cause
its Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, Property, assets or operations
of such Person, and (b) obtain as needed all Permits necessary for its
operations and maintain such Permits in good standing, except in the case where
noncompliance with either CLAUSE (a) or (b) above is not reasonably likely to
have a Material Adverse Effect.
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7.04. PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower
shall pay, and cause each of its Subsidiaries to pay, (a) all taxes, assessments
and other governmental charges imposed upon it or on any of its Property or
assets or in respect of any of its franchises, business, income or Property
before any penalty, addition to tax or interest accrues thereon, and (b) all
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by SECTION 8.03) upon any of the
Borrower's or such Subsidiary's Property or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that
no such taxes, assessments and governmental charges referred to in CLAUSE (a)
above or claims referred to in CLAUSE (b) above need be paid if being contested
in good faith by appropriate proceedings diligently instituted and conducted and
if such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor. The Borrower will not, nor
will it permit any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person (other than with the Parent, the
Borrower or any of their respective Subsidiaries).
7.05. INSURANCE. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect the insurance policies and programs listed on SCHEDULE 5.01-X or
substantially similar policies and programs or other policies and programs as
are acceptable to the Lender and, upon the request of the Lender, such other
insurance which, in the sole and reasonable judgment of the Lender, is necessary
or desirable to increase the likelihood of the repayment of the Obligations.
All such policies and programs shall be maintained with insurers acceptable to
the Lender. Each certificate and policy relating to Property damage, boiler and
machinery and/or business interruption coverage shall contain an endorsement, in
form and substance acceptable to the Lender, showing loss payable to the Lender,
and, if required by the Lender, naming the Lender as an additional insured under
such policy. Each certificate and policy relating to coverages other than the
foregoing shall, if required by the Lender, contain an endorsement naming the
Lender as an additional insured under such policy. Such endorsement or an
independent instrument furnished to the Lender shall provide that the insurance
companies will give the Lender at least thirty (30) days' written notice before
any such policy or policies of insurance shall be altered adversely to the
interests of the Lender or cancelled and that no act, whether willful or
negligent, or default of the Borrower, any of its Subsidiaries or any other
Person shall affect the right of the Lender to recover under such policy or
policies of insurance in case of loss or damage. In the event the Borrower or
any of its Subsidiaries, at any time or times hereafter shall fail to obtain or
maintain any of the policies or insurance required herein or to pay any
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premium in whole or in part relating thereto, then the Lender, without
waiving or releasing any obligations or resulting Event of Default hereunder,
may at any time or times thereafter (but shall be under no obligation to do
so) obtain and maintain such policies of insurance and pay such premiums and
take any other action with respect thereto which the Lender deems advisable.
All sums so disbursed by the Lender shall be part of the Obligations, payable
as provided in this Agreement.
7.06. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The
Borrower shall permit, and cause each of its Subsidiaries to permit, any
authorized representative(s) designated by the Lender to visit and inspect any
of the Properties of the Borrower or any of its Subsidiaries, to examine, audit,
check and make copies of their respective financial and accounting records,
books, journals, orders, receipts and any correspondence and other data relating
to their respective businesses or the transactions contemplated hereby, by the
Purchase Documents or by the Recoil Acquisition Documents (including, without
limitation, in connection with environmental compliance, hazard or liability or
any Government Contract), and to discuss their affairs, finances and accounts
with their officers and independent certified public accountants, all upon
reasonable notice and at such reasonable times during normal business hours, as
often as may be reasonably requested. At the request of the Lender and upon
delivery to the Borrower of invoices therefor, each such visitation and
inspection shall be at the Borrower's expense. The Borrower shall keep and
maintain, and cause its Subsidiaries to keep and maintain, in all material
respects proper books of record and account in which entries in conformity with
GAAP shall be made of all dealings and transactions in relation to their
respective businesses and activities, including, without limitation,
transactions and other dealings with respect to the Collateral. If an Event of
Default has occurred and is continuing, the Borrower, upon the Lender's request,
shall turn over copies of any such records to the Lender or its representatives.
7.07. INSURANCE AND CONDEMNATION PROCEEDS. The Borrower hereby
directs (and, if applicable, shall cause its Subsidiaries to direct) all
insurers under policies of Property damage, boiler and machinery and business
interruption insurance and payors of any condemnation claim or award relating to
the Property to pay all proceeds payable under such policies or with respect to
such claim or award directly to the Lender, and in no case to the Borrower or
one or more of its Subsidiaries and the Lender; PROVIDED, HOWEVER, that, with
respect to any such proceeds relating to the Property of RCL, such proceeds
shall be payable to the Lender hereunder only after payment in full of the
"Obligations" under (and as defined in) the RCL Loan Agreement. Such proceeds
shall constitute Net Cash Proceeds of Sale and shall be applied to the
Obligations in accordance with SECTION 3.02(b)(vi).
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7.08. ERISA COMPLIANCE. The Borrower shall, and shall cause each of
its Subsidiaries and ERISA Affiliates to, establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the
Internal Revenue Code, all other applicable laws, and the regulations thereunder
and the respective requirements of the governing documents for such Plans.
7.09. FOREIGN EMPLOYEE BENEFIT PLAN COMPLIANCE. The Borrower shall,
and shall cause each of its Subsidiaries and ERISA Affiliates to, establish,
maintain and operate all Foreign Employee Benefit Plans to comply in all
material respects with all laws and regulations applicable thereto and the
respective requirements of the governing documents for such Plans.
7.10. GOVERNMENT CONTRACT COMPLIANCE. The Borrower shall, and shall
cause each of its Subsidiaries to (a) maintain all Permits pertaining to
Government Contracts required to operate the Borrower's business as it is
currently conducted, including, without limitation, (i) all Facility Security
Clearance(s) and Personnel Security Clearance(s), (ii) all certifications of
products manufactured by the Borrower which are on the "Qualified Products List"
of any United States Governmental Authority, and (iii) all Export Licenses and
other similar Permits; and (b) comply in all material respects with all
Requirements of Law and Contractual Obligations pertaining to each Government
Contract.
7.11. MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause
each of its Subsidiaries to, maintain in all material respects all of their
respective owned and leased Property in good, safe and insurable condition and
repair, and not permit, commit or suffer any waste or abandonment of any such
Property and from time to time shall make or cause to be made all material
repairs, renewal and replacements thereof, including, without limitation, any
capital improvements which may be required; PROVIDED, HOWEVER, that such
Property may be altered or renovated in the ordinary course of business.
7.12. CONDEMNATION. Immediately upon learning of the institution of
any proceeding for the condemnation or other taking of any of the owned or
leased Real Property of the Borrower or any of its Subsidiaries, the Borrower
shall notify the Lender of the pendency of such proceeding, and permit the
Lender to participate in any such proceeding, and from time to time will deliver
to the Lender all instruments reasonably requested by the Lender to permit such
participation.
7.13. FUTURE LIENS ON REAL PROPERTY. The Borrower shall, and shall
cause its Subsidiaries to, execute and deliver to the Lender, immediately upon
the acquisition or leasing of any Real Property, a mortgage, deed of trust,
assignment or other appropriate instrument evidencing a Lien upon any such Real
Property, lease or interest, together with such title insurance
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policies (mortgagee's form), certified surveys, appraisals, and local counsel
opinions with respect thereto and such other agreements, documents and
instruments which the Lender deems necessary or desirable, the same to be in
form and substance substantially the same as the mortgages and other Loan
Documents relating to Real Property executed and delivered in connection with
the Original Credit Agreement, and to be subject only to (a) Liens permitted
under SECTION 8.03 and (b) such other Liens as the Lender may reasonably
approve, it being understood that the granting of such additional security
for the Obligations is a material inducement to the execution and delivery of
this Agreement by the Lender.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent:
8.01. INDEBTEDNESS. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations;
(ii) trade payables, wages and other accrued expenses incurred
in the ordinary course of business;
(iii) the Transaction Costs;
(iv) to the extent permitted by ARTICLE IX and the RCL Loan
Agreement and in any event in an aggregate amount not to exceed
$3,000,000 at any time, Capital Leases and purchase money Indebtedness
incurred to finance the acquisition of fixed assets, and Indebtedness
incurred to refinance such Capital Leases and purchase money
Indebtedness;
(v) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent
that payment thereof is not required pursuant to SECTION 7.04;
(vi) Indebtedness constituting Accommodation Obligations
permitted by SECTION 8.05;
(vii) Indebtedness arising from intercompany loans from the
Parent or any of Borrower's wholly-owned Subsidiaries to the Borrower,
PROVIDED, that all such Indebtedness shall be evidenced by promissory
notes (which, if payable to RCL, Recoil Holdings or Recoil
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Australia Holdings, shall be delivered to the Lender in accordance with
the RCL Loan Documents) and shall be subordinated in right of payment to
the Obligations;
(viii) Indebtedness with respect to reasonable warranties and
indemnities made under any agreements for asset sales permitted under
SECTION 8.02;
(ix) Indebtedness with respect to warranties and indemnities in favor
of Recoil Australia, Recoil U.S. and the Vendors under the Recoil
Acquisition Documents;
(x) Indebtedness under the RCL Loan Agreement and any
refinancing thereof, provided that the aggregate outstanding amount of
Indebtedness described in this clause (x) is not increased by the
refinancing; and
(xi) Permitted Existing Indebtedness.
8.02. SALES OF ASSETS. Neither the Borrower nor any of its
Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose of
any Property, whether now owned or hereafter acquired, or any income or profits
therefrom, or enter into any agreement to do so, except:
(i) the sale of Property having an aggregate Fair Market Value
of not more than $1,000,000 in any Fiscal Year for cash consideration
not less than the Fair Market Value thereof, PROVIDED that the
Borrower complies with the mandatory prepayment provisions set forth
in SECTION 3.01(b) or RCL complies with the mandatory prepayment
provisions set forth in SECTION 3.01(b) of the RCL Loan Agreement (as
applicable);
(ii) the transfer of Property from a Subsidiary of the Borrower
to the Borrower;
(iii) the sale of Inventory in the ordinary course of business;
(iv) the disposition of Equipment if (A) such Equipment is
obsolete or no longer useful in the ordinary course of the Borrower's
or such Subsidiary's business, PROVIDED, that the aggregate Fair
Market Value of all such Equipment disposed of in any Fiscal Year
shall not exceed $500,000, or (B) within six (6) months after such
disposition, the proceeds therefrom are either (I) used to finance the
purchase of replacement Equipment and the Borrower delivers to the
Lender evidence of such use and that the replacement Equipment is free
and clear of all Liens except those created under the Loan Documents
or (II) delivered to the Lender for application to the repayment of
the
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Obligations or the "Obligations" under (and as defined in) the RCL
Loan Agreement (as applicable);
(v) the licensing of General Intangibles as permitted by the
Loan Documents or the RCL Loan Documents (as applicable); and
(vi) any Investment permitted under SECTION 8.04.
8.03. LIENS. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of their respective Property or assets except:
(i) Liens created by the Loan Documents and the RCL Loan
Documents;
(ii) Customary Permitted Liens;
(iii) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of the Borrower's or such Subsidiary's purchase thereof) securing
an amount not to exceed $3,000,000 in the aggregate at any time or
from time to time, PROVIDED, that such Liens shall not apply to any
Property of the Borrower or its Subsidiaries other than that purchased
or subject to such Capital Lease; and
(iv) Permitted Existing Liens.
8.04. INVESTMENTS. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iii) contributions to and payments of benefits under any Plan
(in accordance with the terms of the Plan) permitted by this
Agreement;
(iv) Investments (in an aggregate unrecovered amount not to
exceed $1,400,000) by the Borrower in Kaynar U.K. and by Kaynar U.K.
in Recoil U.K., including, without limitation, the Borrower's
ownership of the Capital Stock of Kaynar U.K. and Kaynar U.K.'s
ownership of the Capital Stock of Recoil U.K.;
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(v) Investments arising from intercompany loans from the
Borrower to the Parent which, together with the amount of dividends or
distributions to the Parent on the Capital Stock of the Borrower
permitted under SECTION 8.06(ii), shall not exceed an aggregate amount
of $600,000 in any Fiscal Year, PROVIDED, that (A) all such
Investments shall be evidenced by promissory notes which are pledged
to the Lender in accordance with the provisions of the Security
Agreement and (B) such intercompany loans, dividends or distributions
shall be made by the Borrower solely to enable the Parent to pay (I)
operating expenses of the Parent in an amount not to exceed $50,000 in
any fiscal year of the Parent, (II) accrued interest on the "Term
Loans" under (and as defined in) the Parent Loan Agreement and the PIK
Dividend Notes (including, without limitation, that portion of the
principal amount of the "Initial Term Loan" under (and as defined in)
the Parent Loan Agreement or the PIK Dividend Notes attributable to
interest which has been capitalized in accordance with the Parent Loan
Agreement or the PIK Dividend Note Agreement, as applicable) and (III)
if and only if all accrued interest on such Term Loans and the PIK
Dividend Notes (including, without limitation, that portion of the
principal amount of such Initial Term Loan or the PIK Dividend Notes
attributable to interest which has been capitalized in accordance with
the Parent Loan Agreement or the PIK Dividend Note Agreement, as
applicable) as of the then most recent date on which interest on any
such Term Loans or the PIK Dividend Notes is payable has been (or will
be concurrently therewith) paid in full in cash, dividends or
distributions on the preferred stock of the Parent;
(vi) Investments arising from intercompany loans which are
permitted under SECTION 8.01(vii);
(vii) Investments (in each case in an aggregate unrecovered
amount not to exceed $12,000,000) by the Borrower in Recoil Holdings
and Recoil Australia Holdings and by Recoil Holdings and Recoil
Australia Holdings in RCL, including, without limitation, the
Borrower's ownership of the Capital Stock of Recoil Holdings and
Recoil Australia Holdings and Recoil Holdings's and Recoil Australia
Holdings's ownership of the Capital Stock of RCL;
(viii) Investments (in an aggregate unrecovered amount not to
exceed $600,000) by the Borrower in Kaynar Femipari, including,
without limitation, the Borrower's ownership of the Capital Stock of
Kaynar Femipari; and
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(ix) Investments in the Borrower's Subsidiaries (other than
those permitted by CLAUSES (iv), (vii) and (viii)) in existence, and
in the unrecovered amounts, on the Amendment and Restatement Effective
Date.
8.05. ACCOMMODATION OBLIGATIONS. Neither the Borrower nor any of its
Subsidiaries shall directly or indirectly create or become or be liable with
respect to any Accommodation Obligation, except:
(i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of
business;
(ii) Permitted Existing Accommodation Obligations;
(iii) Accommodation Obligations arising under the Loan
Documents; and
(iv) Accommodation Obligations of Recoil Holdings and Recoil
Australia Holdings arising under the RCL Loan Documents.
8.06. RESTRICTED JUNIOR PAYMENTS. Neither the Borrower nor any of
its Subsidiaries shall declare or make any Restricted Junior Payment, except
for:
(i) dividends or distributions to the Borrower on the Capital
Stock of any of its wholly-owned Subsidiaries; and
(ii) for so long as no Event of Default has occurred and is
continuing, dividends or distributions to the Parent on the Capital
Stock of the Borrower which, together with the principal amount of
intercompany loans from the Borrower to the Parent permitted under
SECTION 8.04(v), shall not exceed an aggregate amount of $600,000 in
any Fiscal Year, PROVIDED, that such intercompany loans, dividends or
distributions shall be made by the Borrower solely to enable the
Parent to pay (A) operating expenses of the Parent in an amount not to
exceed $50,000 in any fiscal year of the Parent, (B) accrued interest
on the "Term Loans" under (and as defined in) the Parent Loan
Agreement or the PIK Dividend Notes (including, without limitation,
that portion of the principal amount of the "Initial Term Loan" under
(and as defined in) the Parent Loan Agreement or the PIK Dividend
Notes attributable to interest which has been capitalized in
accordance with the Parent Loan Agreement or the PIK Dividend Note
Agreement, as applicable) and (C) if and only if all accrued interest
on such Term Loans and the PIK Dividend Notes (including, without
limitation, that
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portion of the principal amount of such Initial Term Loan or
the PIK Dividend Notes attributable to interest which has been
capitalized in accordance with the Parent Loan Agreement or the PIK
Dividend Note Agreement, as applicable) as of the then most recent
date on which interest on any such Term Loans or the PIK Dividend
Notes is payable has been (or will concurrently therewith) paid in
full in cash, dividends or distributions on the preferred stock of the
Parent.
8.07. CONDUCT OF BUSINESS. Neither the Borrower nor any of its
Subsidiaries shall engage in any business other than (i) the businesses engaged
in by AFS on the Initial Closing Date, (ii) the businesses engaged in by Recoil
Australia and its Subsidiaries on the Amendment and Restatement Effective Date
and (iii) any business or activities which are substantially similar, related or
incidental thereto; PROVIDED, HOWEVER, that Recoil Holdings and Recoil Australia
Holdings shall not engage in any business other than the holding of the Capital
Stock of RCL and, in the case of Recoil Holdings, one share of the Capital Stock
of Recoil Belgium.
8.08. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the
Borrower nor any of its Subsidiaries shall directly or indirectly enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any holder or holders of more than five percent (5%) of any class of equity
Securities of the Borrower or the Parent, or with any Affiliate of the Borrower
which is not its Subsidiary, on terms that are less favorable to the Borrower or
any of its Subsidiaries, as applicable, than those that might be obtained in an
arm's length transaction at the time from Persons who are not such a holder or
Affiliate. Nothing contained in this SECTION 8.08 shall prohibit (i) any
transaction expressly permitted by SECTIONS 8.01, 8.05 or 8.06; (ii) increases
in compensation and benefits for officers and employees of the Borrower or any
of its Subsidiaries which are customary in the industry or consistent with the
past business practice of the Borrower or such Subsidiary, PROVIDED, that no
Event of Default or Potential Event of Default has occurred and is continuing;
(iii) payment of customary directors' fees and indemnities; (iv) performance of
any obligations arising under the Transaction Documents; or (v) transactions
between the Borrower and the Parent or the Borrower and any of its Subsidiaries,
PROVIDED that no Event of Default or Potential Event of Default results
therefrom.
8.09. RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor
any of its Subsidiaries shall enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or Property, whether now or hereafter
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acquired, except for (i) transactions permitted under SECTION 8.02 or SECTION
8.16 and (ii) a merger of Recoil Holdings and Recoil Australia Holdings,
PROVIDED that such merger will not result in any adverse tax consequences to
Recoil Holdings, Recoil Australia Holdings, RCL or the Lender.
8.10. SALES AND LEASEBACKS. Neither the Borrower nor any of its
Subsidiaries shall become liable, directly, by assumption or by Accommodation
Obligation, with respect to any lease, whether an Operating Lease or a Capital
Lease, of any Property (whether real or personal or mixed) (i) which it or one
of its Subsidiaries sold or transferred or is to sell or transfer to any other
Person, or (ii) which it or one of its Subsidiaries intends to use for
substantially the same purposes as any other Property which has been or is to be
sold or transferred by it or one of its Subsidiaries to any other Person in
connection with such lease.
8.11. ERISA. The Borrower shall not:
(i) engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code for which a statutory or class exemption is
not available or a private exemption has not been previously obtained
from the Department of Labor;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue
Code), with respect to any Benefit Plan, whether or not waived;
(iii) fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(iv) establish, maintain or otherwise become liable with respect
to, or permit any ERISA Affiliate to establish, maintain or otherwise
become liable with respect to, any Benefit Plan;
(v) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate is required
to make under any agreement relating to such Multiemployer Plan, or
any law pertaining thereto;
(vi) fail, or permit any ERISA Affiliate to fail, to pay any
required installment or any other payment required under Section 412
of the Internal Revenue Code on or before the due date for such
installment or other payment;
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(vii) amend, or permit any ERISA Affiliate to amend, a Benefit
Plan resulting in an increase in current liability for the plan year
such that the Borrower or any ERISA Affiliate is required to provide
security to such Plan under Section 401(a)(29) of the Internal Revenue
Code;
(viii) permit any unfunded liabilities with respect to any
Foreign Pension Plan; or
(ix) fail, or permit any of its Subsidiaries or ERISA Affiliates
to fail, to pay any required contributions or payments to a Foreign
Pension Plan on or before the due date for such required installment
or payment.
8.12. ISSUANCE OF CAPITAL STOCK. Neither the Borrower nor any of its
Subsidiaries shall issue any Capital Stock to any Person except for the Capital
Stock issued by such Persons as of the Amendment and Restatement Effective Date.
8.13. ORGANIZATIONAL DOCUMENTS. Neither the Borrower nor any of its
Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective Organizational Documents as in effect on
the date hereof.
8.14. BANK ACCOUNTS. Neither the Borrower nor any of its
Subsidiaries shall open or maintain any deposit account with any Person unless
(i) such Person is a bank or financial institution reasonably acceptable to the
Lender, (ii) such Person has executed a Collection Account Agreement with
respect to such deposit account, and (iii) SCHEDULE 1.01.1 reflects (or shall
have been amended to reflect) such Person as a Collection Account Bank and such
deposit account as a Collection Account under this Agreement.
8.15. FISCAL YEAR. Neither the Borrower nor any of its consolidated
Subsidiaries shall change its Fiscal Year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
8.16. SUBSIDIARIES. (a) Within 180 days after the Amendment and
Restatement Effective Date, the Borrower shall have caused Recoil U.K. to merge
with, or transfer all of its assets to, Kaynar U.K. or shall have taken, and
shall have caused Kaynar U.K. and Recoil U.K. to have taken, all actions
requested by the Lender in order for Kaynar U.K. to pledge to the Lender, and to
register and otherwise perfect such pledge of, the Capital Stock of Recoil U.K.
in accordance with the laws of England and Wales.
(b) The Borrower shall not, and shall cause Kaynar International and
Recoil Belgium not to, increase the value of any such Subsidiary's assets by
more than 25% of the value of such Subsidiary as of the Amendment and
Restatement Effective
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Date unless the Borrower shall have taken, and shall have caused such
Subsidiaries to have taken, all actions requested by the Lender to register
and otherwise perfect the Lender's security interest in 65% of the Capital
Stock of such Subsidiaries evidenced by the Pledge Agreement under the laws
of Barbados, Belgium and France, respectively.
(c) The Borrower shall not, and shall cause Kaynar Femipari not to,
allow the value of Kaynar Femipari's assets to exceed $500,000 at any time
unless the Borrower shall have taken, and shall have caused Kaynar Femipari to
have taken, all actions requested by the Lender to register and otherwise
perfect the Lender's security interest in 65% of the Capital Stock of Kaynar
Femipari evidenced by the Pledge Agreement under the laws of Hungary.
(d) The Borrower shall not, and shall cause Recoil Holdings and
Recoil Australia Holdings not to, engage in any business other than the holding
of the Capital Stock of RCL and, in the case of Recoil Holdings, one share of
the Capital Stock of Recoil Belgium.
(e) The Borrower shall not create any Subsidiaries other than Kaynar
Femipari, Kaynar International, Kaynar U.K., Recoil Australia Holdings, Recoil
Belgium, Recoil Holdings and Recoil U.K.
ARTICLE IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
9.01. CONSOLIDATED CASH FLOW. Consolidated Cash Flow, as determined
as of each date set out below for the 12-month period ending on such date, shall
not be less than the amount set out below opposite such date:
Date Minimum Amount
---- --------------
June 30, 1996 $8,000,000
September 30, 1996 $8,000,000
December 31, 1996 $8,000,000
March 31, 1997 $9,000,000
June 30, 1997 $9,000,000
September 30, 1997 $9,000,000
December 31, 1997 $9,000,000
March 31, 1998 $10,000,000
June 30, 1998 $10,000,000
September 30, 1998 $10,000,000
December 31, 1998 $10,000,000
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9.02. CONSOLIDATED INTEREST COVERAGE RATIO. The Consolidated
Interest Coverage Ratio, as determined as of each date set out below for the 12-
month period ending on such date, shall not be less than the amount set out
below opposite such date:
Date Minimum Ratio
---- -------------
June 30, 1996 2.50 to 1
September 30, 1996 2.50 to 1
December 31, 1996 2.75 to 1
March 31, 1997 2.75 to 1
June 30, 1997 2.75 to 1
September 30, 1997 2.75 to 1
December 31, 1997 2.75 to 1
March 31, 1998 3.00 to 1
June 30, 1998 3.00 to 1
September 30, 1998 3.00 to 1
December 31, 1998 3.00 to 1
9.03. CONSOLIDATED TOTAL FUNDED INDEBTEDNESS COVERAGE RATIO. The
Consolidated Total Funded Indebtedness Coverage Ratio, as determined as of each
date set out below for the twelve month period ending on such date, shall not be
greater than the ratio set out below opposite such date:
Date Maximum Ratio
---- -------------
June 30, 1996 4.5 to 1
September 30, 1996 4.5 to 1
December 31, 1996 3.5 to 1
March 31, 1997 3.5 to 1
June 30, 1997 3.5 to 1
September 30, 1997 3.5 to 1
December 31, 1997 3.5 to 1
March 31, 1998 3.5 to 1
June 30, 1998 3.5 to 1
September 30, 1998 3.5 to 1
December 31, 1998 3.5 to 1
9.04. NET WORKING CAPITAL TO SENIOR INDEBTEDNESS RATIO. The Net
Working Capital to Senior Indebtedness Ratio, as determined as of the end of
each fiscal quarter set out below, shall not be less than the ratio set out
below opposite such Fiscal Year:
Fiscal Year Minimum Ratio
----------- -------------
1996 0.60 to 1
1997 0.65 to 1
1998 0.70 to 1
9.05. CAPITAL EXPENDITURES. The Borrower shall not make or incur,
and shall not permit any of its Subsidiaries to make or incur, Capital
Expenditures in any Fiscal Year set out
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below in an aggregate amount greater than the amount set out below opposite
such Fiscal Year:
Fiscal Year Maximum Amount
----------- --------------
1996 $4,500,000
1997 $3,500,000
1998 $3,500,000
PROVIDED, HOWEVER, that solely for purposes of calculating compliance with this
SECTION 9.05, (a) the amount of Capital Expenditures made or incurred by the
Borrower and its Subsidiaries in any Fiscal Year shall not include Capital
Expenditures made or incurred in such Fiscal Year as a direct result of (i) the
Borrower's or any of its Subsidiaries' response to any Release of a Contaminant,
(ii) any Remedial Action taken by the Borrower or any of its Subsidiaries or
(iii) any efforts or activities of the Borrower or any of its Subsidiaries to
comply with any Environmental Law, or (b) the amount of Capital Expenditures
made or incurred by the Borrower and its Subsidiaries in Fiscal Year 1996 shall
not include Capital Expenditures directly resulting from the Recoil Acquisition.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall fail to
pay when due any of the Obligations.
(b) BREACH OF CERTAIN COVENANTS. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under SECTIONS 6.08, 7.01, and 7.06, ARTICLE VIII or ARTICLE IX.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Borrower to the Lender herein or by the
Borrower or any of its Subsidiaries in any of the other Loan Documents or in any
statement or certificate at any time given by any such Person pursuant to any of
the Loan Documents shall be false or misleading in any material respect on the
date as of which made (or deemed made).
(d) OTHER DEFAULTS. The Borrower shall default in the performance of
or compliance with any term contained in this Agreement (other than as covered
by PARAGRAPHS (a), (b) or (c) of this SECTION 10.01) or any default or event of
default shall occur under any of the other Loan Documents, and such default or
event of default shall continue for fifteen (15) days after the
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Borrower has knowledge of the default or, if earlier, receipt by the Borrower
of a notice of the default from the Lender.
(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES; PARENT
AGREEMENTS. The Borrower or any of its Subsidiaries shall fail to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (other than
an Obligation) having a principal amount in excess of $100,000; or any breach,
default or event of default shall occur, or any other condition shall exist
under any instrument, agreement or indenture pertaining to any such
Indebtedness; or any such Indebtedness shall be otherwise declared to be due and
payable (by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by the Borrower or any of its Subsidiaries (other than by
a regularly scheduled required prepayment) prior to the stated maturity thereof;
or any "Event of Default" under (and as defined in) the RCL Loan Agreement or
either of the Parent Agreements has occurred and is continuing.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Borrower or
any of its Subsidiaries and the petition shall not be dismissed, stayed, bonded
or discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Borrower or any of its Subsidiaries in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law; or the board of directors of the Borrower
or any of its Subsidiaries (or any committee thereof) adopts any resolution or
otherwise authorizes any action to approve any of the foregoing.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over the Borrower or any of its
Subsidiaries or over all or a substantial part of the Property of the Borrower
or any of its Subsidiaries shall be entered; or an interim receiver, trustee or
other custodian of the Borrower or any of its Subsidiaries or of all or a
substantial part of the Property of the Borrower or any of its Subsidiaries
shall be appointed or a warrant of attachment, execution or similar process
against any substantial part of the Property of the Borrower or any of its
Subsidiaries shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days after entry, appointment or
issuance; or the board of directors of the Borrower or any of its Subsidiaries
(or any committee thereof) adopts any resolution or otherwise authorizes any
action to approve any of the foregoing.
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(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Borrower
or any of its Subsidiaries of the Borrower shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
Property; or the Borrower or any of its Subsidiaries of the Borrower shall make
any assignment for the benefit of creditors or shall be unable or fail, or admit
in writing its inability, to pay its debts as such debts become due.
(h) JUDGMENTS AND ATTACHMENTS. Any money judgment (other than a
money judgment covered by insurance as to which the insurance company has
acknowledged coverage), writ or warrant of attachment, or similar process
against the Borrower or any of its Subsidiaries of the Borrower or any of their
respective assets involving in any case an amount in excess of $500,000 is
entered and shall remain undischarged, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered
against the Borrower or any of its Subsidiaries decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of sixty (60) days; or the Borrower or any of its
Subsidiaries shall otherwise dissolve or cease to exist except as specifically
permitted by this Agreement.
(j) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any
reason, (i) any Loan Document ceases to be in full force and effect or the
Borrower or any of its Subsidiaries party thereto seeks to repudiate its
obligations thereunder and the Liens intended to be created thereby are, or the
Borrower or any such Subsidiary seeks to render such Liens, invalid and
unperfected, or (ii) Liens in favor of the Lender contemplated by the Loan
Documents shall, at any time, for any reason, be invalidated or otherwise cease
to be in full force and effect, or such Liens shall be subordinated or shall not
have the priority contemplated by this Agreement or the Loan Documents.
(k) TERMINATION EVENT. Any Termination Event occurs which the Lender
believes could reasonably be expected to subject either the Borrower or any
ERISA Affiliate to liability in excess of $250,000.
(l) WAIVER APPLICATION. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Lender believes
that the substantial business hardship upon which the application for the
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waiver is based could subject either the Borrower or any ERISA Affiliate to
liability in excess of $250,000.
(m) SUSPENSIONS, DEBARMENT. Any suspension or debarment with respect
to Government Contracts is imposed on the Borrower, any of its Subsidiaries or
any of their respective directors, officers, employees, consultants or agents.
(n) MATERIAL ADVERSE CHANGE. An event shall exist which has a
Material Adverse Effect.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with SECTION 11.05.
10.02. RIGHTS AND REMEDIES.
(a) ACCELERATION AND TERMINATION. Upon the occurrence of any Event
of Default described in SECTIONS 10.01(f) or 10.01(g), the Commitments shall
automatically and immediately terminate and the unpaid principal amount of, and
any and all accrued interest on, the Obligations and all accrued fees shall
automatically become immediately due and payable, without presentment, demand,
or protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to demand
or accelerate and of acceleration), all of which are hereby expressly waived by
the Borrower; and upon the occurrence and during the continuance of any other
Event of Default, the Lender may, by written notice to the Borrower, (i) declare
that the Commitments are terminated, whereupon the Commitments and the
obligation of the Lender to make any Loan hereunder or issue, or cause the
issuance of, any Letter of Credit not then issued shall immediately terminate,
and/or (ii) declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Obligations to be, and the same shall thereupon be,
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by the Borrower.
(b) DEPOSIT FOR LETTERS OF CREDIT. In addition, after the occurrence
and during the continuance of an Event of Default, the Borrower shall, promptly
upon demand by the Lender, deliver to the Lender, cash for deposit in an account
designated by the Lender, together with the execution and delivery of such
documents and instruments as the Lender may request in order to perfect or
protect the Lender's Lien with respect thereto, in an aggregate principal amount
equal to the then outstanding Letter of Credit Obligations. Any amounts so
delivered to the Lender which are not applied to the Letter of Credit
Obligations shall, after the expiration of all Letters of Credit issued pursuant
to this Agreement, be returned to the Borrower.
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(c) DEFAULT RATE OF INTEREST. In addition to any other remedies
available to the Lender after the occurrence of an Event of Default, the Lender
shall be entitled to receive interest on the Obligations at the default rate in
accordance with SECTION 2.04(c).
(d) ENFORCEMENT. The Borrower acknowledges that in the event the
Borrower or any of its Subsidiaries fails to perform, observe or discharge any
of their respective obligations or liabilities under this Agreement or any other
Loan Document, any remedy of law may prove to be inadequate relief to the
Lender; therefore, the Borrower agrees that the Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
ARTICLE XI
MISCELLANEOUS
11.01. EXPENSES. The Borrower agrees upon demand to pay, or
reimburse the Lender for, all of the Lender's reasonable internal and external
audit, legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket costs
and expenses of every type and nature (including, without limitation, the
reasonable fees, expenses and disbursements of Sidley & Austin, local and
foreign legal counsel, auditors, accountants, appraisers, printers, insurance
and environmental advisers, and other consultants and agents) incurred by the
Lender in connection with (a) the preparation, negotiation and execution of this
Agreement and the Loan Documents and any amendments, consents, waivers,
assignments, restatements, or supplements to any of the same; (b) the Lender's
periodic audits of the Borrower and its Subsidiaries after the Initial Closing
Date; (c) the protection of the Liens under the Loan Documents after the Initial
Closing Date (including, without limitation, any reasonable fees and expenses
for local counsel in various jurisdictions); (d) the ongoing administration of
this Agreement and the Loans, including consultation with attorneys in
connection therewith and with respect to the Lender's rights and
responsibilities under this Agreement and the other Loan Documents; (e) the
protection, collection or enforcement of any of the Obligations or Loan
Documents or any security therefor or exercising or enforcing any other right or
remedy available to the Lender under the Loan Documents; (f) the commencement,
defense or intervention in any court proceeding relating in any way to the
Obligations, the Property, the Borrower, any of its Subsidiaries, this Agreement
or any of the other Transaction Documents; (g) the response to, and preparation
for, any subpoena or request for document production with which the Lender is
served or deposition or other proceeding in which the Lender is called to
testify, in each case, relating in any way to the Obligations, the Property, the
Borrower, any of its Subsidiaries, this Agreement or any of the other
Transaction Documents; (h) in connection with any
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refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (i) in taking any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) described in CLAUSES (e) through (h)
above.
11.02. INDEMNITY. The Borrower further agrees to defend, protect,
indemnify, and hold harmless the Lender and each of its officers, directors,
employees, attorneys and agents (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in ARTICLE IV) (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses (other than loss of
profits), damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (excluding any taxes and
including, without limitation, the fees and disbursements of counsel or
consulting firms for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), imposed on, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of (a) this Agreement or
the other Loan Documents, or any act, event or transaction related or attendant
thereto or to the Purchase, the Recoil Acquisition, the making of the Loans or
the issuing, or causing the issuance of, Letters of Credit, the management of
such Loans or Letters of Credit, the use or intended use of the proceeds of the
Loans or Letters of Credit, or any of the other transactions contemplated by the
Transaction Documents, or (b) any Liabilities and Costs under Environmental Laws
arising from or in connection with the past, present or future operations of the
Borrower, its Subsidiaries or any of their respective predecessors in interest,
or, the past, present or future environmental condition of any Property, the
presence of asbestos-containing materials at any Property or the Release or
threatened Release of any Contaminant (collectively, the "Indemnified Matters");
PROVIDED, HOWEVER, that the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters to the extent caused by or
resulting from the willful misconduct or gross negligence of the Indemnitee (or
any other Indemnitee whose willful misconduct or grossly negligent acts were
authorized by the Indemnitee claiming indemnification hereunder), as determined
by a court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.
11.03. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the
accounting principles used in the preparation of the most recent financial
statements referred to in SECTION 6.01 are hereafter required or permitted by
the rules, regulations,
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pronouncements and opinions of the Financial Accounting Standards Board or
the American Institute of Certified Public Accountants (or successors thereto
or agencies with similar functions) and are adopted by the Borrower with the
agreement of its independent certified public accountants and such changes
result in a change in the method of calculation of any of the covenants,
standards or terms found in ARTICLE VIII and ARTICLE IX, the parties hereto
agree to enter into negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating compliance with such covenants, standards and terms by the
Borrower shall be the same after such changes as if such changes had not been
made; PROVIDED, HOWEVER, that no change in GAAP that would affect the method
of calculation of any of the covenants, standards or terms shall be given
effect in such calculations until such provisions are amended, in a manner
satisfactory to the Lender and the Borrower, to so reflect such change in
accounting principles.
11.04. SETOFF. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon the
occurrence and during the continuance of any Event of Default, the Lender is
hereby authorized by the Borrower at any time or from time to time, without
notice to any Person (any such notice being hereby expressly waived) to set off
and to appropriate and to apply any and all deposits (general or special,
including, but not limited to, indebtedness evidenced by certificates of
deposit, whether matured or unmatured (but not including trust accounts)) and
any other Indebtedness at any time held or owing by the Lender to or for the
credit or the account of the Borrower against and on account of the Obligations
of the Borrower to the Lender, including, but not limited to, all Loans and
Letters of Credit and all claims of any nature or description arising out of or
in connection with this Agreement, irrespective of whether or not (a) the Lender
shall have made any demand hereunder or (b) the Lender shall have declared the
principal of and interest on the Loans and other amounts due hereunder to be due
and payable as permitted by ARTICLE X and even though such Obligations may be
contingent or unmatured.
11.05. AMENDMENTS AND WAIVERS. Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement shall
be effective without the written agreement of the Lender and the Borrower, and
no termination or waiver of any provision of this Agreement, or consent to any
departure by the Borrower therefrom, shall be effective without the written
concurrence of the Lender, which the Lender shall have the right to grant or
withhold in its sole discretion. Any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which it was given.
No notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.
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11.06. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. For the purposes hereof, the addresses
of the parties hereto (until notice of a change thereof is delivered as provided
in this SECTION 11.06) shall be as follows:
(a) If to the Lender, at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Murry Stegelmann
Telecopier No. (203) 316-7894
with copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Corporate Finance Group
Department Counsel
Telecopier No. (203) 316-7889
and
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: Edward D. Eddy, III, Esq.
Telecopier No. (213) 896-6600
(b) If to the Borrower, at:
Kaynar Technologies Inc.
800 South State College Blvd.
Fullerton, California 92634-3001
Attention: David A. Werner
Telecopier No. (714) 680-3153
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attn: C. James Levin, Esq.
Telecopier No. (213) 669-6407
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PROVIDED, that the Lender or the Borrower shall have the right to change any of
the above-listed addresses by properly addressed and delivered notice to the
other party.
11.07. SURVIVAL OF WARRANTIES AND AGREEMENTS. All representations
and warranties made herein and all obligations of the Borrower in respect of
taxes, indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans, the issuance and discharge of Letters of Credit, and the
termination of this Agreement and shall not be limited in any way by the passage
of time or occurrence of any event and shall expressly cover time periods when
the Lender may have come into possession or control of any of the Borrower's or
its Subsidiaries' Property.
11.08. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of the Lender in the exercise of any power, right
or privilege under any of the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under the Loan Documents are
cumulative to and not exclusive of any rights or remedies otherwise available.
11.09. MARSHALLING; PAYMENTS SET ASIDE. The Lender shall be under no
obligation to marshall any assets in favor of the Borrower or any other party or
against or in payment of any or all of the Obligations. To the extent that the
Borrower makes a payment or payments to the Lender or the Lender receives
payment from the proceeds of the Collateral or exercises its rights of setoff,
and such payment or payments or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party, then to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied, and all Liens, right and remedies therefor,
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
11.10. SEVERABILITY. In case any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
11.11. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall
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not constitute a part of this Agreement or be given any substantive effect.
11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
11.13. LIMITATION OF LIABILITY. No claim may be made by the Borrower
or the Lender or any other Person against the Borrower, the Lender or the
Affiliates, directors, officers, employees, attorneys or agents of any of them
for any special, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Borrower and the Lender hereby waive,
release and agree not to sue upon any such claim for any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
11.14. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lender. The Lender may assign all
or any part of its rights and obligations under this Agreement and the other
Loan Documents to any Person upon thirty (30) days' prior written notice to (but
without the consent of) the Borrower, it being agreed and understood that the
Lender's right to assign its interests under this Agreement and the other Loan
Documents shall be independent of any right of assignment in favor of the Lender
with respect to any other agreement, document or instrument to which it is a
party. The rights hereunder of the Borrower, or any interest therein, may not
be assigned without the written consent of the Lender.
11.15. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.
(a) PERSONAL JURISDICTION. (i) THE LENDER AND THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY CALIFORNIA STATE COURT OR FEDERAL COURT SITTING
IN LOS ANGELES, CALIFORNIA, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF
MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF,
CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH
OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
BORROWER IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION AS ITS AGENT (THE
"PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH
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COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING
SERVICE IN EVERY RESPECT. THE LENDER AND THE BORROWER AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION WHICH IS
NECESSARY OR DESIRABLE TO ENABLE THE LENDER TO REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF THE LENDER. THE BORROWER AGREES THAT IT WILL NOT
ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE LENDER TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE BORROWER
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.
(b) SERVICE OF PROCESS. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
(C) WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT.
11.16. COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement
and any amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against the Borrower and
the Lender as of the date when all of the conditions set forth in SECTION 4.01
have been satisfied or duly waived in accordance with SECTION 11.05 (the
"Amendment and Restatement Effective Date"). Subject to the provisions of this
Agreement (including, without limitation, the preliminary statements hereto),
this Agreement and each of the other Loan Documents
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shall be construed to the extent reasonable to be consistent one with the
other, but to the extent that the terms and conditions of this Agreement are
actually inconsistent with the terms and conditions of any other Loan
Document, this Agreement shall govern.
11.17. CONFIDENTIALITY. The Lender shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement and
identified as such by the Borrower in accordance with the Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide offeree, transferee or participant
in connection with the contemplated transfer or participation or as required or
requested by any Governmental Authority or representative thereof or pursuant to
legal process and shall require any such offeree, transferee or participant to
agree (and require any of its offerees, transferees or participants to agree) to
comply with this SECTION 11.17. In no event shall the Lender be obligated or
required to return any materials furnished by the Borrower; PROVIDED, HOWEVER,
that each offeree shall be required to agree that if it does not become a
transferee or participant it shall return all materials furnished to it by the
Borrower in connection with this Agreement. Any and all confidentiality
agreements entered into between the Lender and the Borrower shall survive the
execution of this Agreement.
11.18. NO NOVATION. This Agreement is an amendment and restatement
of the Existing Credit Agreement. The parties hereto hereby acknowledge and
agree that (a) the Term Note delivered by the Borrower to the Lender on the
Amendment and Restatement Effective Date is given in renewal of and
rearrangement and substitution, but not in payment, for the "Term Note" (as
defined in the Existing Credit Agreement) (b) the "Revolving Credit Note" (as
defined in the Existing Credit Agreement) is the same instrument as the
Revolving Credit Note referred to in this Agreement and (c) this Agreement and
the delivery of the substitute Term Note pursuant hereto are in no way intended
to constitute a novation of the Existing Credit Agreement, such "Term Note,"
such "Revolving Credit Note" or the outstanding principal amount of the
Indebtedness evidenced by any of them.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
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11.19. ENTIRE AGREEMENT. This Agreement, taken together with all of
the other Loan Documents, embodies the entire agreement and understanding among
the parties hereto and all prior agreements and understandings, written and
oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWER: KAYNAR TECHNOLOGIES INC.
- --------
By /s/ D.A. Werner
--------------------------------
Name: David A. Werner
Title: Vice President
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION
- ------
By /s/ P.C. Keenoy
--------------------------------
Name: Peter C. Keenoy
Title: Managing Director
<PAGE>
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT, CONSENT AND LIMITED WAIVER TO AMENDED AND
RESTATED CREDIT AGREEMENT dated as of December 17, 1996 (this "FIRST
AMENDMENT") is entered into between Kaynar Technologies Inc., a Delaware
corporation (the "BORROWER") and General Electric Capital Corporation, a New
York corporation (the "LENDER") and relates to that certain Amended and
Restated Credit Agreement dated as of August 12, 1996, between the Borrower
and the Lender (as supplemented or otherwise modified from time to time
through the date hereof, the "CREDIT AGREEMENT").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into the Credit
Agreement;
WHEREAS, the Borrower has requested that the Lender amend the Credit
Agreement (i) to increase the Revolving Credit Commitment from $9,500,000 to
$15,000,000, (ii) to make an additional Term Loan in a principal amount of
$6,000,000, the proceeds of which will be used to reduce the outstanding
principal balance of the Revolving Loans and (iii) to effect other
amendments, all as more fully described herein; and
WHEREAS, the Borrower has also requested that (i) the Lender consent
to an amendment to the Recoil Acquisition Agreements and (ii) the Lender
waive certain Events of Default under the Credit Agreement, in each case as
more fully described herein;
NOW, THEREFORE, in consideration of the above premises, the Borrower
and the Lender agree as follows:
1. DEFINITIONS. Capitalized terms used and not otherwise defined
herein have the meanings assigned to them in the Credit Agreement.
2. AMENDMENTS TO THE CREDIT AGREEMENT. Upon the "Effective Date"
(as defined in SECTION 6 below), the Credit Agreement is hereby amended as
follows:
2.1 AMENDMENTS TO SECTION 1.01. Section 1.01 of the Credit
Agreement is amended as follows:
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(a) The following definition of "Fourth Supplemental Term Loan"
is added in proper alphabetical order:
"FOURTH SUPPLEMENTAL TERM LOAN" is defined in SECTION
2.01(a).
(b) The following definition of "New First Amendment" is added
in proper alphabetical order:
"NEW FIRST AMENDMENT" means the First Amendment, Consent and
Limited Waiver to Amended and Restated Credit Agreement dated as of
December 17, 1996, between the Borrower and the Lender.
(c) The following definition of "New First Amendment Effective
Date" is added in proper alphabetical order:
"NEW FIRST AMENDMENT EFFECTIVE DATE" means the "Effective
Date" under (and as defined in) the New First Amendment.
(d) The definition of "Revolving Credit Commitment" is hereby
amended and restated in its entirety to read as follows:
"REVOLVING CREDIT COMMITMENT" means the obligation of the
Lender to make Revolving Loans and to issue, or cause to be issued,
Letters of Credit pursuant to the terms and conditions of this
Agreement (and, for the applicable period, the Existing Credit
Agreement), in an aggregate amount (including all Letter of Credit
Obligations and the principal amount of all Revolving Loans) which
shall not exceed (i) from the Initial Closing Date through and
including December 31, 1994, $6,500,000, (ii) from January 1, 1995
until the Third Amendment Effective Date, $5,000,000, (iii) from the
Third Amendment Effective Date until the New First Amendment Effective
Date, $9,500,000 and (iv) from the New First Amendment Effective Date
until the Revolving Credit Termination Date, $15,000,000, as
permanently reduced from time to time pursuant to SECTION 3.01.
(e) The definition of "Term Loan Commitment" is hereby amended
and restated in its entirety to read as follows:
"TERM LOAN COMMITMENT" means the obligation of the Lender to
make its Term Loan pursuant to the terms and conditions of this
Agreement (and, for the
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applicable period, the Existing Credit Agreement), which shall be in
an aggregate principal amount of (i) from the Initial Closing Date
until the First Amendment Effective Date, $15,800,000, (ii) from the
First Amendment Effective Date until the Third Amendment Effective
Date, $17,800,000, (iii) from the Third Amendment Effective Date
until the Amendment and Restatement Effective Date, $19,425,000,
(iv) from the Amendment and Restatement Effective Date until the New
First Amendment Effective Date, $22,425,000 and (v) from and after the
New First Amendment Effective Date, $28,225,000, as permanently reduced
from time to time by payments or prepayments on the Term Loan made
pursuant to SECTION 2.01(d) or SECTION 3.01.
2.2 AMENDMENTS TO SECTION 2.01. Section 2.01 of the Credit
Agreement is hereby amended as follows:
(a) Section 2.01(a) is hereby amended and restated in its
entirety to read as follows:
(a) AMOUNT OF TERM LOAN. The Lender (i) has made a term loan,
in Dollars, to the Borrower on the Initial Closing Date in an
aggregate amount equal to $15,800,000 (the "Initial Term Loan"), (ii)
has made a term loan, in Dollars, to the Borrower on the First
Amendment Effective Date, in an aggregate amount equal to $2,000,000
(the "Supplemental Term Loan"), (iii) has made a term loan, in
Dollars, to the Borrower on the Third Amendment Effective Date, in an
aggregate amount equal to $2,000,000 (the "Second Supplemental Term
Loan"), (iv) has made a term loan, in Dollars, to the Borrower on the
Amendment and Restatement Effective Date, in an aggregate amount equal
to $4,000,000 (the "Third Supplemental Term Loan") and (v) subject to
the terms and conditions set forth in this Agreement and the New First
Amendment, hereby agrees to make a term loan, in Dollars, to the
Borrower on the New First Amendment Effective Date, in an aggregate
amount equal to $6,000,000 (the "Fourth Supplemental Term Loan" and
together with the Initial Term Loan, the Supplemental Term Loan, the
Second Supplemental Term Loan and the Third Supplemental Term Loan,
the "Term Loan"). After giving effect to the advance of the Fourth
Supplemental Term Loan, the outstanding principal balance of the Term
Loan will be $28,225,000.
(b) Section 2.01(c) is hereby amended and restated in its
entirety to read as follows:
(c) MAKING OF TERM LOANS. (i) Promptly after receipt of a
Notice of Borrowing under SECTION 2.01(b)
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(or telephonic notice in lieu thereof), the Lender shall deposit an
amount equal to the amount requested by the Borrower to be made in
respect of the Third Supplemental Term Loan under this SECTION
2.01(c), in immediately available funds, not later than 1:00 p.m.
(Chicago time) on the Amendment and Restatement Effective Date.
Subject to the fulfillment of the conditions precedent set forth in
SECTION 4.01, the Lender shall make the proceeds of such amounts
available to the Borrower by disbursing such proceeds on the
Amendment and Restatement Effective Date to an account specified in
a written notice from the Lender to the Borrower or in accordance
with the Borrower's disbursement instructions set forth in such
Notice of Borrowing.
(ii) Upon the New First Amendment Effective Date, the Lender
shall be deemed to have advanced the proceeds of the Fourth
Supplemental Term Loan to the Borrower to reduce the outstanding
principal balance of the Revolving Loans by an amount equal to
$6,000,000, it being agreed and understood that such amount shall be a
transfer on the books of the Lender from one loan account of the
Borrower to another and that no proceeds of the Fourth Supplemental
Term Loan shall otherwise be made available to the Borrower.
(c) Section 2.01(d)(i) is hereby amended by deleting the fourth
sentence thereof in its entirety and substituting the following sentences
in lieu thereof:
On the Amendment and Restatement Effective Date, the Borrower executed
and delivered to the Lender a third substitute promissory note, in
substantially the form of EXHIBIT I attached hereto and made a part
hereof, evidencing the Initial Term Loan, the Supplemental Term Loan,
the Second Supplemental Term Loan and the Third Supplemental Term
Loan. On the New First Amendment Effective Date, the Borrower shall
execute and deliver to the Lender a fourth substitute promissory note,
in substantially the form of EXHIBIT I-A attached hereto and made a
part hereof, evidencing the Term Loan (the "Term Note").
(e) Section 2.01(e) is hereby amended and restated in its
entirety to read as follows:
(e) USE OF PROCEEDS OF TERM LOANS. (i) The proceeds of the
Third Supplemental Term Loan shall be used (A) to pay the "Purchase
Price" under (and as defined in) the Recoil U.S. Acquisition
Agreement, (B) to pay (and enable Kaynar U.K. to pay) that portion of
<PAGE>
the "Purchase Price" under (and as defined in) the Recoil Australia
Acquisition Agreement attributable to the Capital Stock of Recoil
Belgium and Recoil U.K., (C) to make capital contributions to Recoil
Holdings and Recoil Australia Holdings, the proceeds of which will be
contributed to the capital of RCL (and the Borrower shall cause RCL to
use the proceeds of such capital contributions for the purposes set
forth in Section 2.01(e) of the RCL Loan Agreement) and (D) for
working capital in the ordinary course of the Borrower's business and
for other lawful general corporate purposes.
(ii) The proceeds of the Fourth Supplemental Term Loan shall be
used to reduce the outstanding principal balance of the Revolving
Loans by an amount equal to $6,000,000.
2.3 AMENDMENT TO SECTION 2.02. Section 2.02(e)(i) is hereby
amended by deleting the second sentence thereof in its entirety and substituting
the following sentences in lieu thereof:
On the Third Amendment Effective Date, the Borrower executed and
delivered to the Lender a substitute promissory note in the form of
EXHIBIT J attached hereto and made a part hereof, evidencing the then
existing Revolving Credit Commitment. On the New First Amendment
Effective Date, the Borrower shall execute and deliver to the Lender a
second substitute promissory note, in substantially the form of
EXHIBIT J-A attached hereto and made a part hereof, evidencing the
Revolving Loans and the Revolving Credit Commitment (the "Revolving
Credit Note").
2.4 AMENDMENT TO SECTION 2.05. Section 2.05 is hereby amended
by inserting immediately following Section 2.05(c) the following new Section
2.05(d):
(d) NEW FIRST AMENDMENT FEE. In addition to any fees paid
pursuant to SECTION 2.05(a) or 2.05(b), the Borrower shall pay to the
Lender, upon execution of the New First Amendment, a fee of $60,000.
2.5 AMENDMENT TO SECTION 6.01. Section 6.01(f)(iii) of the
Credit Agreement is hereby amended by amending and restating clause (C) thereof
in its entirety to read as follows:
(C) a budget in reasonable detail of the types and amounts of Capital
Expenditures to be made during such
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Fiscal Years and the amount of forecasted Excess Cash Flow for such
Fiscal Years, and
2.6 AMENDMENT TO SECTION 9.05. Section 9.05 of the Credit
Agreement is hereby amended by deleting in its entirety the table of Fiscal
Years and Maximum Amounts therein and inserting in lieu thereof the following
table of Fiscal Years and Maximum Amounts:
Fiscal Year Maximum Amount
----------- --------------
1996 $6,000,000
1997 $7,500,000
1998 $8,000,000
2.7 AMENDMENTS TO EXHIBITS.
(a) A new Exhibit I-A is hereby added to the Credit Agreement in
the form of ANNEX A attached hereto and made a part hereof.
(b) A new Exhibit J-A is hereby added to the Credit Agreement in
the form of ANNEX B attached hereto and made a part hereof.
3. LENDER CONSENT. As of the Effective Date, the Lender hereby
approves the agreement to amend the Recoil Acquisition Agreements in
substantially the form of ANNEX C attached hereto and made a part hereof (the
"RECOIL AMENDMENT"); PROVIDED, HOWEVER, that if material additions or deletions
to the text of the Recoil Amendment attached hereto are made, a new consent from
the Lender shall be required. Upon the effectiveness of the Recoil Amendment,
the Borrower shall promptly deliver to the Lender a fully executed copy of the
Recoil Amendment.
4. LIMITED WAIVER. As of the Effective Date, the Lender hereby
(a) waives the provisions of the letter agreement dated August 12, 1996 (the
"POST-CLOSING LETTER") between the Borrower and the Lender with respect to
the obligation of the Borrower to deliver the documents set forth on ANNEX D
attached hereto and made a part hereof (the "POST-CLOSING DOCUMENTS") within
the time periods specified in the Post-Closing Letter and extends the time
period for the delivery of such documents to December 30, 1996 and (b) waives
the Events of Default under Sections 10.01(c) and 10.01(d) of the Credit
Agreement resulting from the Borrower's failure to deliver the Post-Closing
Documents within the time periods specified in the Post-Closing Letter;
PROVIDED, HOWEVER, that, if such Post-Closing Documents are not delivered on
or before March 5, 1997 (the "EXPIRATION DATE"), (x) the limited waiver under
this SECTION 4 shall expire, (y) the
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Borrower shall pay to the Lender on the Expiration Date a fee in the amount
of $25,000, and the Borrower hereby irrevocably authorizes the Lender to make
a Revolving Loan on the Expiration Date to pay such fee without regard to the
notice requirements set forth in Section 3.02(b)(iii) of the Credit
Agreement, and (z) notwithstanding any payment of the fee described in CLAUSE
(y), the Events of Default arising from the Borrower's failure to deliver the
Post-Closing Documents prior to the Expiration Date shall remain in effect
until all of the Post-Closing Documents, in form and substance satisfactory
to the Lender, are delivered to the Lender, and the Lender reserves all
rights and remedies available to it as a result of the continued existence of
such Events of Default.
5. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants to the Lender that, as of the Effective Date and after giving
effect to this First Amendment:
(a) All of the representations and warranties of the Borrower
contained in this First Amendment, the Credit Agreement and the other Loan
Documents are true and correct in all material respects on and as of the
Effective Date, as if then made (other than representations and warranties
which expressly speak as of a different date, which shall be true and
correct in all material respects as of that date);
(b) No Potential Event of Default or Event of Default has occurred or
is continuing or will result after giving effect to this First Amendment;
and
(c) The Borrower has not voluntarily, by operation of law or
otherwise, assigned, conveyed, transferred or encumbered, either directly
or indirectly, in whole or in part, any right to or interest in any of the
"Released Claims" (as defined in SECTION 7 below) purported to be released
by this First Amendment.
6. EFFECTIVE DATE. This First Amendment shall become effective as
of the date first written above (the "EFFECTIVE DATE") upon the satisfaction of
each of the following conditions:
(a) the Lender shall have received each of the following documents,
in each case in form and substance satisfactory to the Lender:
(i) counterparts hereof executed by the Borrower and the Lender;
(ii) a Revolving Credit Note substantially in the form of
EXHIBIT I-A to the Credit Agreement (as added by this First
Amendment), duly executed by the Borrower;
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<PAGE>
(iii) a Term Note substantially in the form of EXHIBIT J-A to
the Credit Agreement (as added by this First Amendment), duly executed
by the Borrower;
(iv) Modification Agreements with respect to the leasehold deeds
of trust executed by the Borrower in favor of the Lender with respect
to the Property located in Fullerton, California and Placentia,
California, substantially in the forms of ANNEXES E and F attached
hereto and made a part hereof, respectively;
(v) Loan Modification Title Insurance Endorsements with respect
to the title insurance policies issued to the Lender in connection
with the Modification Agreements described in CLAUSE (iv) above;
(vi) an opinion of counsel to the Borrower with respect to the
Loan Documents described in CLAUSES (i) through (iv) above;
(vii) a certificate of the chief financial officer of the
Borrower certifying that all conditions precedent to the effectiveness
of this First Amendment have been satisfied;
(viii) a certificate of the Secretary or Assistant Secretary of
the Borrower dated the Effective Date certifying (A) the names and
true signatures of the incumbent officers of the Borrower authorized
to sign this First Amendment and the other Transaction Documents
executed in connection with this First Amendment to which it is a
party, (B) that the By-laws of the Borrower have not been amended or
otherwise modified since the Amendment and Restatement Effective Date
and remain in full force and effect as of the Effective Date, (C) that
the Articles of Incorporation of the Borrower have not been amended or
otherwise modified since the date of the most recent certification
thereof by the Secretary of State of Delaware delivered to the Lender
and remain in full force and effect as of the Effective Date and (D)
the resolutions of the Borrower's board of directors approving and
authorizing the execution, delivery and performance of this First
Amendment and the other Transaction Documents executed in connection
with this First Amendment to which the Borrower is a party; and
(ix) such additional documentation as the Lender may reasonably
request;
(b) the Borrower shall have paid to the Lender the New First
Amendment Fee described in SECTION 2.4 above;
-8-
<PAGE>
(c) no law, regulation, order, judgment or decree of any Governmental
Authority shall, and the Lender shall not have received any notice that
litigation is pending or threatened which is likely to, enjoin, prohibit or
restrain the consummation of the transactions contemplated by this First
Amendment, except for such laws, regulations, orders or decrees, or pending
or threatened litigation that in the aggregate could not reasonably be
expected to result in a Material Adverse Effect;
(d) all of the representations and warranties of the Borrower
contained in this First Amendment, the Credit Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of
the Effective Date, as if then made (other than representations and
warranties which expressly speak as of a different date, which shall be
true and correct in all material respects as of that date);
(e) all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this First Amendment shall be satisfactory in all respects
in form and substance to the Lender; and
(f) no Event of Default or Potential Event of Default shall have
occurred and be continuing on the Effective Date or will result after
giving effect to this First Amendment.
7. OUTSTANDING INDEBTEDNESS. The Borrower hereby acknowledges and
agrees that as of November 29, 1996 the aggregate outstanding principal amount
of the Revolving Loans under the Credit Agreement was $7,520,861.27 and that the
aggregate outstanding principal amount of the Term Loan under the Credit
Agreement was $22,225,000 and that such principal amounts are payable pursuant
to the Credit Agreement, as amended hereby, without offset, withholding,
counterclaim or deduction of any kind. The Borrower, for itself and on behalf
of its officers and directors, and its respective predecessors, successors and
assigns (collectively, the "RELEASORS"), hereby waives, releases and forever
discharges the Lender, and its parent corporation, Subsidiaries and Affiliates,
officers, directors, shareholders employees, attorneys, agents and servants, and
its respective predecessors, successors, heirs and assigns (collectively, the
"LENDER PARTIES"), from any and all claims of every type, kind, nature,
description or character, known and unknown, whensoever arising out of any
actions or omissions of the Lender Parties, except all such claims of Affiliates
of Lender arising out of sales of inventory in the ordinary course of business,
occurring any time up to and including the date hereof, which in any way arise
out of, are connected with or relate to the Credit Agreement or any other Loan
Documents (the "RELEASED CLAIMS") and
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<PAGE>
agrees not to bring any action in any judicial, administrative or other
proceeding against the Lender Parties, alleging any such Released Claim or
otherwise in connection with any such Released Claim.
8. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS.
(a) Upon the Effective Date, each reference in the Credit Agreement
to "this Agreement", "hereunder", "hereof" or words of like import, and each
reference in the other Loan Documents to the Credit Agreement, shall mean and be
a reference to the Credit Agreement as amended hereby.
(b) This First Amendment shall be limited solely to the matters
expressly set forth herein and shall not (i) constitute an amendment of any
other term or condition of the Credit Agreement or any other Loan Document, (ii)
prejudice any right or rights which the Lender or Lender Parties may now have or
may have in the future under or in connection with the Credit Agreement or any
other Loan Document, (iii) require the Lender to agree to a similar transaction
on a future occasion, (iv) be deemed or construed as an admission of liability
with respect to the Released Claims or otherwise by the Lender Parties or (v)
create any rights herein to another Person or other beneficiary or otherwise,
except to the extent specifically provided herein.
(c) Except to the extent specifically consented to herein, the
respective provisions of the Credit Agreement and the other Loan Documents shall
not be amended, modified, impaired or otherwise affected hereby, and such
documents and the Obligations under each of them are hereby confirmed in full
force and effect.
9. MISCELLANEOUS. This First Amendment is a Loan Document. The
headings herein are for convenience of reference only and shall not alter or
otherwise affect the meaning hereof.
10. COUNTERPARTS. This First Amendment may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
11. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE INTERPRETED, AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK.
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<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this First
Amendment to be executed by their respective officers thereunto duly authorized
as of the date first above written.
KAYNAR TECHNOLOGIES INC.
By: /s/ D.A. Werner
----------------------------------
Name: David A. Werner
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ P.C. Keenoy
----------------------------------
Name: P.C. Keenoy
Title: Authorized Signatory
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<PAGE>
ANNEX A
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
FORM OF AMENDED AND RESTATED REVOLVING CREDIT NOTE
Attached.
<PAGE>
ANNEX B
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
FORM OF AMENDED AND RESTATED TERM NOTE
Attached.
<PAGE>
ANNEX C
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
FORM OF RECOIL AMENDMENT
Attached.
<PAGE>
ANNEX D
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
POST-CLOSING DOCUMENTS
1. Replacement stock certificate for 650 shares of the Capital Stock
of Kaynar International owned by the Borrower.
2. Landlord Waiver with respect to the lease of the Property located
at Stamford Road, Oakleigh, Victoria.
3. Amended Articles of Association of Kaynar International deleting
the provisions regarding recognition of stock transfers.
4. Evidence of perfection of pledge by the Borrower of 65% of the
Capital Stock of Recoil Femipari.
<PAGE>
ANNEX E
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
FORM OF MODIFICATION AGREEMENT (FULLERTON)
Attached.
<PAGE>
ANNEX F
TO
FIRST AMENDMENT, CONSENT AND LIMITED WAIVER
FORM OF MODIFICATION AGREEMENT (PLACENTIA)
Attached.
<PAGE>
Exh. 10.5
[EXECUTION COPY]
===============================================================================
TERM LOAN AGREEMENT
dated as of August 12, 1996
between
RCL PTY,
as Borrower
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Lender
===============================================================================
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<PAGE>
TABLE OF CONTENTS
Section Page
- -------- ----
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . 19
1.03. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . 20
1.04. References to this Agreement. . . . . . . . . . . . . . . . . . . 20
1.05. Miscellaneous Terms . . . . . . . . . . . . . . . . . . . . . . . 20
1.06. Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II
AMOUNTS AND TERMS OF TERM LOAN
2.01. Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.02. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.03. Authorized Officers and Agents. . . . . . . . . . . . . . . . . . 22
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Prepayments; Reductions in Term Loan Commitment . . . . . . . . . 23
3.02. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.03. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.04. Promise to Repay; Evidence of Indebtedness. . . . . . . . . . . . 27
ARTICLE IV
CONDITIONS TO TERM LOAN
4.01. Conditions Precedent to Effective Date. . . . . . . . . . . . . . 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Representations and Warranties. . . . . . . . . . . . . . . . . . 31
ARTICLE VI
REPORTING COVENANTS
6.01. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 39
6.02. Operations Reports. . . . . . . . . . . . . . . . . . . . . . . . 42
6.03. Collateral Reporting. . . . . . . . . . . . . . . . . . . . . . . 43
6.04. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 43
6.05. Lawsuits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.06. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.07. Employee Benefit Plan Notices . . . . . . . . . . . . . . . . . . 45
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<PAGE>
6.08. Environmental Notices . . . . . . . . . . . . . . . . . . . . . . 45
6.09. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.10. Government Contract Notices . . . . . . . . . . . . . . . . . . . 45
6.11. Other Information . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VII
AFFIRMATIVE COVENANTS
7.01. Organizational Existence, Etc.. . . . . . . . . . . . . . . . . . 47
7.02. Organizational Powers; Conduct of Business. . . . . . . . . . . . 47
7.03. Compliance with Laws, Etc.. . . . . . . . . . . . . . . . . . . . 47
7.04. Payment of Taxes and Claims; Tax Consolidation. . . . . . . . . . 47
7.05. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
7.06. Inspection of Property; Books and Records; Discussions . . . . . 48
7.07. Insurance and Condemnation Proceeds . . . . . . . . . . . . . . . 49
7.08. [Intentionally omitted] . . . . . . . . . . . . . . . . . . . . . 49
7.09. Employee Benefit Plan Compliance. . . . . . . . . . . . . . . . . 49
7.10. Government Contract Compliance. . . . . . . . . . . . . . . . . . 49
7.11. Maintenance of Property . . . . . . . . . . . . . . . . . . . . . 49
7.12. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
7.13. Business Contracts. . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE VIII
NEGATIVE COVENANTS
8.01. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.02. Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.03. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.04. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.05. Accommodation Obligations . . . . . . . . . . . . . . . . . . . . 52
8.06. Restricted Junior Payments. . . . . . . . . . . . . . . . . . . . 53
8.07. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . 53
8.08. Transactions with Shareholders and Affiliates . . . . . . . . . . 53
8.09. Restriction on Fundamental Changes. . . . . . . . . . . . . . . . 53
8.10. Sales and Leasebacks. . . . . . . . . . . . . . . . . . . . . . . 54
8.11. Employee Benefit Plan Matters . . . . . . . . . . . . . . . . . . 54
8.12. Issuance of Capital Stock . . . . . . . . . . . . . . . . . . . . 54
8.13. Organizational Documents. . . . . . . . . . . . . . . . . . . . . 54
8.14. Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.15. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.16. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
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<PAGE>
Section Page
- --------- ----
ARTICLE IX
FINANCIAL COVENANTS
9.01. Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 55
10.02. Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE XI
MISCELLANEOUS
11.01. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.02. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.03. Change in Accounting Principles. . . . . . . . . . . . . . . . . 61
11.04. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
11.05. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 61
11.06. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.07. Survival of Warranties and Agreements. . . . . . . . . . . . . . 63
11.08. Failure or Indulgence Not Waiver; Remedies Cumulative. . . . . . 63
11.09. Marshalling; Payments Set Aside. . . . . . . . . . . . . . . . . 63
11.10. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 63
11.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.12. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.13. Limitation of Liability. . . . . . . . . . . . . . . . . . . . . 64
11.14. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 64
11.15. Certain Consents and Waivers of the Borrower . . . . . . . . . . 64
11.16. Counterparts; Effectiveness; Inconsistencies . . . . . . . . . . 66
11.17. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 66
11.18. Supervening Legislation. . . . . . . . . . . . . . . . . . . . . 66
11.19. Time is of the Essence . . . . . . . . . . . . . . . . . . . . . 66
11.20 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 67
-iii-
<PAGE>
EXHIBITS
Exhibit A -- Form of Collection Account Agreement
Exhibit B -- Form of Fixed and Floating Charge
Exhibit C -- Form of Notice of Borrowing
Exhibit D -- Form of Parent Pledge Agreement
Exhibit E -- Form of Parent Guaranty
Exhibit F -- Form of Officer's Certificate to Accompany Reports
SCHEDULES
Schedule 1.01.1 -- Collection Accounts and Collection Account Banks
Schedule 1.01.2 -- Permitted Existing Accommodation Obligations
Schedule 1.01.3 -- Permitted Existing Indebtedness
Schedule 1.01.4 -- Permitted Existing Liens
Schedule 5.01-C -- Consents
Schedule 5.01-D -- Subsidiaries; Authorized, Issued and Outstanding
Capital Stock
Schedule 5.01-N -- Pending Actions
Schedule 5.01-S -- Employee Benefit Plan Matters
Schedule 5.01-T -- Labor Contracts
Schedule 5.01-V -- Government Contract Matters
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<PAGE>
TERM LOAN AGREEMENT
This Term Loan Agreement dated as of August 12, 1996 (as further
amended, restated, supplemented or modified from time to time, the
"Agreement") is entered into by and between RCL Pty (ACN 073 075 428), an
unlimited liability company organized under the laws of the State of
Victoria, Australia (the "Borrower"), and General Electric Capital
Corporation, a New York corporation (the "Lender").
ARTICLE I
DEFINITIONS
1.01. CERTAIN DEFINED TERMS. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"ACCOMMODATION OBLIGATION" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof
by the Person incurring the Accommodation Obligation is to provide assurance
to the obligee of such Indebtedness, obligation or liability of another that
such Indebtedness, obligation or liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the
holders thereof will be protected (in whole or in part) against loss in
respect thereof including, without limitation, direct and indirect
guarantees, endorsements (except for collection or deposit in the ordinary
course of business), notes co-made or discounted, recourse agreements,
take-or-pay agreements, keep-well agreements, agreements to purchase or
repurchase such Indebtedness, obligation or liability or any security
therefor or to provide funds for the payment or discharge thereof, agreements
to maintain solvency, assets, level of income, or other financial condition,
and agreements to make payment other than for value received. The amount of
any Accommodation Obligation shall be equal to the amount of the obligation
so guaranteed or otherwise supported; PROVIDED, that (i) if the liability of
the Person extending such guaranty or support is limited with respect thereto
to an amount less than the obligation guaranteed or supported, or is limited
to recourse against a particular asset or assets of such Person, the amount
of the corresponding Accommodation Obligation shall be limited (in the case
of a guaranty or other support limited by amount) to such lesser amount or
(in the case of a guaranty or other support limited by recourse to a
particular asset or assets) to the higher of the Fair Market Value of such
asset or assets at the date for determination of the amount of the
Accommodation Obligation or the value at which such asset or assets would, in
conformity with GAAP, be reflected on or valued for the purposes of preparing
a consolidated balance sheet of such Person as at such determination date;
and (ii) if any obligation is guaranteed or otherwise supported jointly and
severally by a Person and others, then the amount of the liability of such
Person with respect to
<PAGE>
such guaranty or other support to be included in the amount of such Person's
Accommodation Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"ACCOUNT" means all of the Borrower's and each Parent's respective
present and future (i) book debts and accounts receivable, (ii) contract
rights, chattel paper, instruments, documents, deposit accounts (including,
without limitation, the Collection Accounts), and other rights to payment of
any kind, whether or not arising out of or in connection with the sale or
lease of goods or the rendering of services, and whether or not earned by
performance, (iii) any of the foregoing which are not evidenced by
instruments or chattel paper, (iv) intercompany receivables, and any security
documents executed in connection therewith, (v) proceeds of any letters of
credit or insurance policies on which the Borrower or any Parent is named as
beneficiary, (vi) claims against third parties for advances and other
financial accommodations and any other obligations whatsoever owing to the
Borrower or any Parent, (vii) rights in and to all security agreements,
leases, guarantees, instruments, securities, documents of title and other
contracts securing, evidencing, supporting or otherwise relating to any of
the foregoing, together with all rights in any goods, merchandise or
Inventory which any of the foregoing may represent, and (viii) rights in
returned and repossessed goods, merchandise and Inventory which any of the
same may represent, including, without limitation, any right of stoppage in
transit.
"ACCOUNT DEBTOR" means any person who is or who may become obligated
to the Borrower under, with respect to, or on account of an Account or a
General Intangible.
"AFFILIATE" means any Person (other than Lender) which directly or
indirectly owns or controls, on an aggregate basis, including all beneficial
ownership and ownership or control as a trustee, guardian or other fiduciary,
at least ten percent (10%) of the outstanding capital stock (or other
ownership interests) having ordinary voting power to elect a majority of the
board of directors or otherwise to direct or cause the direction of the
management and policies (irrespective of whether, at the time, stock (or
other ownership interest) of any other class or classes of such Person shall
have or might have voting power by reason of the happening of any
contingency) of the Borrower or any Parent which is controlled by or is under
common control with the Borrower, any Parent or any stockholders (or other
owners) of the Borrower or any Parent. For the purpose of this definition,
"control" means the possession, directly or indirectly, of the power to
direct or to cause the direction of management and policies, whether through
the ownership of voting securities, by contract or otherwise.
"AGREEMENT" is defined in the preamble hereto.
"BORROWER" is defined in the preamble hereto.
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<PAGE>
"BORROWING" means the borrowing of the Term Loan hereunder.
"BUSINESS DAY" means a day, in the applicable local time, which is
not a Saturday or Sunday or a legal holiday and on which banks are not
required or permitted by law or other governmental action to close in Los
Angeles, California, Chicago, Illinois, New York, New York or Melbourne,
Victoria, Australia.
"CAPITAL EXPENDITURES" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity
with GAAP, are required to be included in or reflected by KHI's or any of its
Subsidiaries' fixed asset accounts as reflected in any of their respective
balance sheets; PROVIDED, HOWEVER, that Capital Expenditures shall include,
whether or not such a designation would be in conformity with GAAP, (i) that
portion of Capital Leases which is capitalized on the consolidated balance
sheet of KHI and its Subsidiaries and (ii) expenditures for Equipment which
is purchased simultaneously with the trade-in of existing Equipment owned by
KHI or any of its Subsidiaries, to the extent the gross purchase price of the
purchased Equipment exceeds the book value of the Equipment being traded in
at such time.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease or a financing
lease on the balance sheet of that Person.
"CAPITAL STOCK", with respect to any Person, means any shares, capital
stock, stock units or units in the capital of such Person, regardless of class
or designation, and all warrants, options, purchase rights, conversion or
exchange rights, voting rights, calls or claims of any character with respect
thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States or Australian government and
backed by the full faith and credit of the United States or Australian
government; and (ii) domestic and eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit
issued by any commercial bank organized under the laws of the United States,
any state thereof, the District of Columbia, Australia or any state thereof,
any foreign bank, or its branches or agencies (fully protected against
currency fluctuations), which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or Prime-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED, that the maturities of such Cash
Equivalents shall not exceed one year.
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<PAGE>
"CASH FLOW" means, for any Person for any period, the amounts for such
period (taken as a single accounting period determined in conformity with GAAP)
of such Person's (i) net income or loss determined on a first-in-first-out
method of inventory accounting basis, PLUS (ii) depreciation and amortization
expense, PLUS (iii) interest expense, PLUS (iv) foreign, federal and state
income taxes, PLUS (v) state sales taxes arising in connection with the
Purchase, to the extent included in the calculation of net income (or loss),
PLUS (vi) extraordinary losses, PLUS (vii) Liabilities and Costs incurred in
connection with any Remedial Action, to the extent included in the calculation
of net income (or loss), PLUS (viii) Transaction Costs, MINUS (ix) extraordinary
gains.
"CLAIM" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"COLLATERAL" means all Property and interests in Property now owned
or hereafter acquired by the Borrower or either Parent upon which a Lien is
granted under any of the Loan Documents.
"COLLECTION ACCOUNT" means (i) each deposit account of the Borrower
identified on SCHEDULE 1.01.1 and (ii) each deposit account of the Lender
into which collections in respect of Accounts and other proceeds of
Collateral are deposited.
"COLLECTION ACCOUNT AGREEMENT" means, with respect to each
Collection Account of the Borrower or any Parent, an agreement in
substantially the form of EXHIBIT A attached hereto and made a part hereof
(or such other form as may be agreed to by the Borrower and the Lender),
pursuant to which, among other things (i) the Collection Account Bank party
thereto agrees to remit to the Lender or its designee in accordance with
instructions contained therein, on a daily basis and by wire transfer or
through an automated clearing house, all collected funds on deposit in the
Collection Account(s) maintained by such Collection Account Bank (which
agreement may not be revoked, and shall remain in effect, until sixty (60)
days after such Collection Account Bank mails to the Lender and the Borrower
or the applicable Parent a notice of termination), and (ii) the Borrower or
the applicable Parent and the Collection Account Bank confirm the Lender's
perfected first priority liens in the Collection Accounts subject thereto.
"COLLECTION ACCOUNT BANK" means each bank, trust company or other
financial institution (i) identified on SCHEDULE 1.01.1 at which the Borrower
or any Parent maintains one or more Collection Accounts or (ii) at which the
Lender maintains one or more Collection Accounts.
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"COMPLIANCE CERTIFICATE" is defined in SECTION 6.01(d).
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"CORPORATIONS LAW" means the Corporations Law of Australia.
"CUSTOMARY PERMITTED LIENS" means
(i) Liens (other than Environmental Encumbrances and Liens in favor of
the Insurance and Superannuation Commission of Australia) with respect to
the payment of taxes, assessments or governmental charges in all cases which
are not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate
provisions are being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
GAAP;
(iii) Liens (other than Environmental Encumbrances and Liens in favor
of the Insurance and Superannuation Commission of Australia) incurred or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security
benefits or to secure the performance of bids, tenders, sales, contracts
(other than for the repayment of borrowed money), surety and performance
bonds; PROVIDED, that (A) all such Liens do not in the aggregate materially
detract from the value of the Borrower's or any of its Parents assets or
Property or materially impair the use thereof in the operation of their
respective businesses, and (B) all such Liens in connection with worker's
compensation, unemployment insurance or other types of social security
benefits deposits shall secure obligations in an aggregate principal amount
not exceeding $50,000 at any time outstanding; and
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(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or
encumbrances on the use of Real Property which do not interfere with
the ordinary conduct of the business of the Borrower or any of its
Subsidiaries.
"DESIGNATED PREPAYMENT" is defined in SECTION 3.01(b)(iii).
"DOLLARS" and "$" mean the lawful money of the United States.
"EFFECTIVE DATE" is defined in SECTION 11.16.
"EMPLOYEE BENEFIT PLAN" means any superannuation fund within the
meaning of the Superannuation Industry (Supervision) Act 1993 (Cwlth) which
is maintained or contributed to for the benefit of the employees of the
Borrower.
"ENVIRONMENTAL ENCUMBRANCE" is defined in the Fixed and Floating
charge.
"ENVIRONMENTAL HAZARD" is defined in the Fixed and Floating charge.
"ENVIRONMENTAL LAW" is defined in the Fixed and Floating charge.
"EQUIPMENT" means all of the Borrower's and each Parent's respective
present and future (i) equipment, including, without limitation, machinery,
manufacturing, distribution, selling, data processing and office equipment,
assembly systems, tools, molds, dies, fixtures, appliances, furniture,
furnishings, vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal Property (other than the Borrower's
and each Parents' respective Inventory), and (iii) any and all accessions,
parts and appurtenances attached to any of the foregoing or used in
connection therewith, and any substitutions therefor and replacements,
products and proceeds thereof.
"EVENT OF DEFAULT" means any of the occurrences set forth in
SECTION 10.01 after the expiration of any applicable grace period and the
giving of any applicable notice, in each case as expressly provided in
SECTION 10.01.
"EXCESS CASH FLOW" means, for any Fiscal Year, an amount equal to
(i) Cash Flow for such Fiscal Year, MINUS (ii) income taxes paid in cash during
such Fiscal Year, MINUS (iii) state sales taxes arising in connection with the
Purchase which are paid in cash during such Fiscal Year, MINUS (iv) Capital
Expenditures paid in cash during such Fiscal Year, MINUS (v)
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Transaction Costs paid in cash during such Fiscal Year, MINUS (vi) interest
on permitted Indebtedness of KHI and its Subsidiaries paid in cash during
such Fiscal Year, including, without limitation, the interest component of
all Capital Leases, MINUS (vii) for Fiscal Year 1994, $2,000,000, MINUS
(viii) for Fiscal Year 1995 and each Fiscal Year thereafter, scheduled
amortization of the principal portion of the "Term Loan" under (and as
defined in) the KTI Credit Agreement during such Fiscal Year, MINUS (ix)
extraordinary cash losses incurred during such Fiscal Year, MINUS (x)
Liabilities and Costs paid in cash during such Fiscal Year and incurred in
connection with any Remedial Action, PLUS (xi) extraordinary cash gains for
such Fiscal Year, PLUS (xii) any cash gain for such Fiscal Year with respect
to any inventory or accounts purchased from Microdot Aerospace Limited in
connection with the Purchase, to the extent included in the calculation of
net income (or loss), PLUS (or MINUS) (xiii) any decrease (or increase) in
Net Working Capital since the last day of the then immediately preceding
Fiscal Year, the amount for such Fiscal Year in each case determined in
conformity with GAAP for KHI, KTI, the Borrower and their respective
Subsidiaries on a consolidated basis.
"EXCESS PROCEEDS OF ISSUANCE OF STOCK OR INDEBTEDNESS" means net
cash proceeds received by the Borrower or any Parent at any time after the
Effective Date on account of the issuance of (i) Capital Stock of the
Borrower (other than Capital Stock of the Borrower issued to the Parent) (ii)
Capital Stock of either Parent (other than Capital Stock of either Parent
issued to KTI) or (iii) Indebtedness (other than Indebtedness permitted under
SECTION 8.01) of the Borrower or either Parent, in each case net of all
transaction costs and underwriters' discounts with respect thereto.
"EXPORT LICENSE" means any and all licenses, authorizations,
approvals or applications therefor relating to exports, reexports, temporary
exports, temporary imports and imports, as the case may be, granted by or
pending before any Governmental Authority.
"FAIR MARKET VALUE" means, with respect to any asset, the value of the
consideration obtainable in a sale of such asset in the open market, assuming a
sale by a willing seller to a willing purchaser dealing at arm's length and
arranged in an orderly manner over a reasonable period of time, each having
reasonable knowledge of the nature and characteristics of such asset, neither
being under any compulsion to act, determined (a) in good faith by the board of
directors of the Borrower or (b) in an appraisal of such asset, PROVIDED, that
such appraisal was performed relatively contemporaneously with such sale by an
independent third party appraiser and the basic assumptions underlying such
appraisal have not materially changed since the date thereof.
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"FISCAL YEAR" means the fiscal year of the Borrower, which shall be
the 12-month period ending on December 31 of each calendar year.
"FIXED AND FLOATING CHARGE" means the Fixed and Floating Charge
dated August 2, 1996, in substantially the form of EXHIBIT B attached hereto
and made a part hereof, executed by the Borrower in favor of the Lender,
pursuant to which the Borrower grants a security interest to the Lender in
substantially all of its Property, as the same may be amended, restated,
supplemented or modified from time to time.
"GAAP" means (i) with respect to the Borrower, (A) the applicable
accounting standards and practices required by the Corporations Law and (B)
if not inconsistent with the accounting standards described in CLAUSE (i),
generally accepted accounting principles set forth in the opinions and
pronouncements of the Institute of Chartered Accountants in Australia or
Australian Society of Certified Practising Accounts or any successor to
either of them or in such other statements by such other entity as may be in
general use by significant segments of the accounting profession in Australia
as in effect on the date hereof (unless otherwise specified herein as in
effect on another date or dates); and (ii) with respect to the Parents,
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accounting Standards Board or in such other statements by
such other entity as may be in general use by significant segments of the
accounting profession as in effect on the date hereof (unless otherwise
specified herein as in effect on another date or dates).
"GENERAL INTANGIBLES" means all of the Borrower's and each Parent's
respective present and future (i) general intangibles, (ii) rights,
interests, choses in action, causes of action, claims and other intangible
Property of every kind and nature (other than Accounts), (iii) corporate and
other business records, (iv) loans, royalties, and other obligations
receivable, (v) trademarks, registered trademarks, trademark applications,
service marks, registered service marks, service mark applications, patents,
patent applications, trade names, rights of use of any name, labels,
fictitious names, inventions, designs, trade secrets, computer programs,
software, printouts and other computer materials, goodwill, registrations,
copyrights, copyright applications, permits, licenses, franchises, customer
lists, credit files, correspondence, and advertising materials, (vi) customer
and supplier contracts, firm sale orders, rights under license and franchise
agreements, rights under tax sharing agreements, and other contracts and
contract rights, (vii) interests in partnerships and joint ventures, (viii)
tax refunds and tax refund claims, (ix) right, title and interest under
leases, subleases, licenses and concessions and other agreements relating to
Property, (x) deposit accounts (general or special) with any bank or other
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financial institution (including, without limitation, the Collection
Accounts) (xi) credits with and other claims against third
parties (including carriers and shippers), (xii) rights to indemnification and
with respect to support and keep-well agreements, (xiii) reversionary interests
in pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, (xiv) proceeds of insurance of which the Borrower or any
Parent is beneficiary, (xv) letters of credit, guarantees, Liens, security
interests and other security held by or granted to the Borrower or any Parent,
(xvi) uncertificated securities, and (xvii) governmental
certificates and certifications, including, without limitation, certificates and
certifications relating to Government Contracts and Export Licenses,
authorizations and approvals, issued to the Borrower or any parent.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, territorial, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENT CONTRACT" means any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase order of
the Borrower which is entered into with or submitted to any Governmental
Authority, including, among other things, all contracts and work
authorizations to supply goods and services to such Governmental Authority.
"INCOME TAX ASSESSMENT ACT" means the Income Tax Assessment Act 1936
(Cwlth).
"INDEBTEDNESS", as applied to any Person, means, at any time, (i) all
indebtedness, obligations or other liabilities of such Person (A) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instruments, and any accrued interest, fees and charges relating
thereto, (B) under profit payment agreements or in respect of obligations to
redeem, repurchase or exchange any Securities of such Person or to pay dividends
in respect of any stock, (C) with respect to letters of credit issued for such
Person's account, (D) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the ordinary
course of business, (E) in respect of Capital Leases, (F) which are
Accommodation Obligations or (G) under warranties and indemnities; (ii) all
indebtedness, obligations or other liabilities of such Person or others secured
by a Lien on any property of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by such Person, all as of such time;
(iii) all preferred stock subject (upon the occurrence of any contingency or
otherwise) to mandatory redemption; and (iv) all contingent Contractual
Obligations with respect to any of the foregoing.
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"INDEX RATE" means the higher of:
(i) the highest prime or base rate of interest published in New York
City by any of Morgan Guaranty Trust Company of New York, Citibank, N.A.
and Chemical Bank (whether or not such rate is actually charged by any such
bank); and
(ii) the latest published rate for 90-day directly placed commercial
paper (or the mid-point in the range of such rates, if more than one rate
is published) as quoted either in the Federal Reserve Rate Report which
customarily appears in the Friday issue of THE WALL STREET JOURNAL under
"Money Rates" or in such other publication as the Lender may, from time to
time hereafter, designate in writing.
"INSOLVENCY EVENT" is defined in the Fixed and Floating Charge.
"INVENTORY" means all of the Borrower's and each Parent's
respective present and future (i) inventory, (ii) goods, merchandise and other
personal Property furnished or to be furnished under any contract of service or
intended for sale or lease, and all consigned goods and all other items which
have previously constituted Equipment but are then currently being held for sale
or lease in the ordinary course of the Borrower's or any Parent's business,
(iii) raw materials, work-in-process and finished goods, (iv) materials and
supplies of any kind, nature or description used or consumed in the Borrower's
or any Parent's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the Property
described in CLAUSES (i) through (iii) above, (v) goods in which the Borrower or
any Parent has a joint or other interest or right of any kind (including,
without limitation, goods in which the Borrower or any Parent has an
interest or right as consignee), and (vi) goods which are returned to or
repossessed by the Borrower or any Parent; in each case whether in the
possession of the Borrower, any Parent, a bailee, a consignee, or any other
Person for sale, storage, transit, processing, use or otherwise, and any and all
documents for or relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business.
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The amount of any Investment shall be the original cost of such Investment,
plus the cost of all additions thereto less the amount of any return of
capital or principal to the extent such return is in cash with respect to
such Investment without any adjustments for increases or decreases in value
or write-ups, write-downs or write-offs with respect to such Investment.
"KHI" means Kaynar Holdings Inc., a Delaware corporation.
"KHI AGREEMENTS" means (i) the KHI Loan Agreement and the agreements,
documents and instruments executed in connection therewith and (ii) the PIK
Dividend Note Agreement and the PIK Dividend Notes.
"KHI LOAN AGREEMENT" means that certain Term Loan Agreement dated as
of January 3, 1994 by and between KHI and the Lender, as amended and as
amended and restated by that certain Amended and Restated Term Loan Agreement
of even date herewith by and between KHI and the Lender, as the same may be
further amended, restated, supplemented or modified from time to time.
"KTI" means Kaynar Technologies Inc., a Delaware corporation.
"KTI CREDIT AGREEMENT" means that certain Credit Agreement dated as
of January 3, 1994 by and between KTI and the Lender, as amended and as
amended and restated by that certain Amended and Restated Credit Agreement
of even date herewith by and between KHI and the Lender, as the same may be
further amended, restated, supplemented or modified from time to time.
"KTI LOAN DOCUMENTS" means the "Loan Documents" as defined in the
KTI Credit Agreement.
"LENDER" is defined in the preamble hereto.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or Remedial
Action studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.
"LIEN" means any mortgage, deed of trust, pledge, charge,
hypothecation, assignment, conditional sale agreement, deposit arrangement,
security interest, encumbrance, title retention arrangement, bill of sale (as
defined in any statute), profit a prendre, easement, restrictive covenant,
equity interest, garnishee order, writ of execution, right of set-off,
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license to use or occupy, lien (statutory or other), notice under section 218
or 255 of the Income Tax Assessment Act or under section 74 of the Sales Tax
Assessment Act or under any other similar Requirement of Law, preference,
priority or other security agreement or preferential arrangement of any kind
or nature whatsoever in respect of any property of a Person, whether granted
voluntarily or imposed by law, and any agreement to create any of them or
allow any of them to exist, and includes the interest of a lessor under a
Capital Lease or under any financing lease having substantially the same
economic effect as any of the foregoing and the filing of any financing
statement or similar notice, naming the owner of such property as debtor,
under the Uniform Commercial Code or other comparable law of any jurisdiction.
"LOAN ACCOUNT" is defined in SECTION 3.04(b).
"LOAN DOCUMENTS" means this Agreement, the Fixed and Floating
Charge, the Parent Guaranty, the Parent Pledge Agreements and all other
instruments, agreements and written Contractual Obligations between the
Borrower or any Parent and the Lender delivered to the Lender pursuant to or
in connection with the transactions contemplated hereby.
"MANAGEMENT DISCUSSION AND ANALYSIS" is defined in SECTION 6.02.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i) the
financial condition, operations, assets or prospects of KHI, KTI, the Borrower
or any of their respective Subsidiaries, (ii) the ability of KHI, KTI, the
Borrower or any of their respective Subsidiaries to perform their respective
obligations under the Transaction Documents, or (iii) the ability of the
Lender to enforce the Loan Documents.
"NET CASH PROCEEDS OF SALE" means (i) proceeds received by the
Borrower or Parent in cash from the sale, assignment or other
disposition of (but not the lease or license of) any Property, other than sales
permitted under CLAUSES (ii) through (iv) of SECTION 8.02, net of (A) the costs
of sale, assignment or other disposition, (B) any income, franchise, transfer or
other tax liability arising from such transaction and (C) amounts required to be
applied to the repayment of Indebtedness secured by a Lien permitted by
SECTION 8.03 on the asset disposed of, if such net proceeds arise from any
individual sale, assignment or other disposition or from any group of related
sales, assignments or other dispositions; and (ii) proceeds of insurance on
account of the loss of, damage to, or the occurrence of any other insured risk
with respect to, any such Property or Properties, and payments of compensation
for any such Property or Properties taken by condemnation or eminent domain, as
provided in SECTION 7.07.
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"NET WORKING CAPITAL" means, as of any date of determination, the
excess, if any, of (i) consolidated current assets, except cash and Cash
Equivalents, over (ii) consolidated current liabilities, except current
maturities of long-term debt as of such date, in each case for the KHI, KTI,
the Borrower and their respective Subsidiaries on a consolidated basis.
"NOTICE OF BORROWING" means a notice substantially in the form of
EXHIBIT C attached hereto and made a part hereof.
"OBLIGATIONS" means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Lender, or any
Person entitled to indemnification pursuant to SECTION 11.02 of this
Agreement, of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, arising under this Agreement or
any other Loan Document, whether or not for the payment of money, whether
arising by reason of an extension of credit, loan, guaranty, indemnification
or in any other manner, whether direct or indirect (including those acquired
by assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without
limitation, all interest (including, without limitation, interest, whether or
not allowed after the occurence of an event or occurrence described in
SECTION 10.01(f), at the then applicable rate (including the rate in effect
from time to time under SECTION 2.02(c)) specified herein that accrues after
the commencement of any proceeding under the bankruptcy, reorganization,
insolvency, dissolution, liquidation or other debtor relief Requirement of
Law), charges, expenses, fees, attorneys' fees and disbursements and any
other sum chargeable to the Borrower under this Agreement or any other Loan
Document.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a
corporation by (i) the chairman or vice-chairman of its board of directors
(if an officer of such corporation) or (ii) its president, any of its
vice-presidents, its chief financial officer, or its treasurer; PROVIDED,
HOWEVER, that any such certificate executed on behalf of the Borrower shall
be executed by a director or secretary of the Borrower.
"OPERATING LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is not
a Capital Lease.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any corporation,
limited liability company, unlimited liability company or partnership (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation or limited liability company, (ii) the
partnership agreement executed by the partners in the partnership, (iii) the
certificate of registration and memorandum and articles of association of such
unlimited liability company, (iv) the by-laws (or the equivalent governing
documents) of the
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corporation, limited liability company, unlimited liability company or
partnership, and (iv) any document setting forth the designation, amount
and/or relative rights, limitations and preferences of any class or series of
such corporation's Capital Stock or such limited liability company's,
unlimited liability company's or partnership's equity or ownership interests.
"PARENT GUARANTY" means a guaranty and contribution agreement of
even date herewith, substantially in the form of EXHIBIT E attached hereto
and made a part hereof, executed by each Parent in favor of Lender, pursuant
to which each Parent unconditionally guarantees the payment and performance
of the Obligations.
"PARENT PLEDGE AGREEMENT" means the Pledge Agreements dated as of
August 2, 1996, each in substantially the form of EXHIBIT D attached hereto
and made a part hereof, executed by Recoil Holdings and Recoil Australia
Holdings, respectively, in favor of the Lender, pursuant to which such Parent
pledges and grants a security interest to the Lender in 100% of the issued
and outstanding Capital Stock of any Affiliated Person and related Property,
as the same may be amended, restated, supplemented or modified from time to
time.
"PARENTS" means Recoil Australia Holdings and Recoil Holdings, and
"PARENT" means either of them.
"PENSION PLAN" means any Employee Benefit Plan which (i) is
maintained or contributed to for the benefit of employees of the Borrower,
and (ii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"PERMITS" means any license, permit, variance, interim permit, permit
application, approval, consent, certification, qualification or other
authorization under any Requirement of Law applicable to the Borrower or any
Parent or otherwise required by any Governmental Authority in
connection with the business or operations of the Borrower or any Parent,
including, without limitation, any license, permit, consent,
certification, approval, authorization or qualification relating to any
Government Contract.
"PERMITTED EXISTING ACCOMMODATION OBLIGATIONS" means the Accommodation
Obligations of the Borrower and each Parent identified as such on SCHEDULE
1.01.2.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.3.
"PERMITTED EXISTING LIENS" means the Liens on the Property of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1.01.4.
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"PERSON" means any natural person, corporation, limited liability
company, unlimited liability company, limited partnership, general partnership,
joint stock company, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, and any Governmental Authority.
"PIK DIVIDEND NOTE AGREEMENT" means that certain PIK Dividend Note
Agreement dated as of January 3, 1994 by and between the KHI and the
Lender, as the initial holder of the preferred stock of KHI, and the
other Persons from time to time party thereto as "Holders" (as defined therein),
as the same may be amended, restated, supplemented or modified from time to
time.
"PIK DIVIDEND NOTES" means the outstanding promissory notes issued by
KHI pursuant to the PIK Dividend Note Agreement.
"POTENTIAL EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"PROCESS AGENT" is defined in SECTION 11.15.
"PROPERTY" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, Equipment,
Inventory, General Intangible, Account, or other asset owned, leased or operated
by the Borrower or any Parent, as applicable, (including any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
"PURCHASE" means the "Purchase" as defined in the KTI Credit
Agreement.
"REAL PROPERTY" means all of the Borrower's and any Parent's
respective present and future right, title and interest (including, without
limitation, any leasehold estate) in (i) any plots, pieces or parcels of
land, (ii) any improvements, buildings, structures and fixtures now or
hereafter located or erected thereon or attached thereto of every nature
whatsoever (the rights and interests described in CLAUSE (i) or (ii) above
being the "Premises"), (iii) all easements, rights of way, gores of land or
any lands occupied by streets, ways, alleys, passages, sewer rights, water
courses, water rights and powers, and public places adjoining such land, and
any other interests in property constituting appurtenances to the Premises,
or which hereafter shall in any way belong, relate or be appurtenant thereto,
(iv) all hereditaments, gas, oil, minerals (with the right to extract, sever
and remove such gas, oil and minerals), and easements, of every nature
whatsoever, located in or on the Premises and (v) all other rights and
privileges thereunto belonging or appertaining and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of
any of the rights and interests described in CLAUSE (iii) or (iv) above.
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"RECOIL ACQUISITION" means, collectively, (i) the purchase by KTI of
substantially all of the assets of Recoil U.S. pursuant to the Recoil U.S.
Acquisition Agreement and (ii) the purchase by KTI, the Borrower and, if
designated by the Borrower to acquire the shares of Recoil U.K., Kaynar U.K.
of substantially all of the assets of Recoil Australia pursuant to the Recoil
Australia Acquisition Agreement.
"RECOIL ACQUISITION AGREEMENTS" means the Recoil U.S. Acquisition
Agreement and the Recoil Australia Acquisition Agreement, and "RECOIL
ACQUISITION AGREEMENT" means either of them.
"RECOIL ACQUISITION DOCUMENTS" means the Recoil Acquisition Agreements
and all of the agreements, documents and instruments executed in connection with
either of them.
"RECOIL AUSTRALIA" means Recoil Pty Ltd, a company organized under the
laws of the State of Victoria, Australia.
"RECOIL AUSTRALIA ACQUISITION AGREEMENT" means that certain
Australian Asset Sale Agreement dated August , 1996 among KTI, the Borrower,
Recoil Australia and the other Vendors, pursuant to which the Vendors agree
to sell, and the Borrower and KTI agree to purchase, substantially all of the
assets of Recoil Australia.
"RECOIL AUSTRALIA HOLDINGS" means Recoil Australia Holdings, Inc., a
Delaware corporation.
"RECOIL BELGIUM" means Recoil Marketing BVBA, a company organized
under the laws of Belgium.
"RECOIL HOLDINGS" means Recoil Holdings, Inc., a Delaware corporation.
"RECOIL U.K." means Recoil (Europe) Limited., a company organized under
the laws of England and Wales.
"RECOIL U.S." means Recoil Inc., an Oregon corporation.
"RECOIL U.S. ACQUISITION AGREEMENT" means that certain US Asset Sale
Agreement dated August , 1996 among KTI, Recoil U.S., Recoil Australia and the
other Vendors, pursuant to which Recoil U.S. agrees to sell, and KTI agrees to
purchase, substantially all of the assets of Recoil U.S.
"RELEASE" means release, presence, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any
Property or Third Party Property, including the movement of Environmental
Hazards through or in the air, soil, surface water, groundwater, Property or
Third Party Property.
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"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Environmental Hazards in the indoor or
outdoor environment; (ii) prevent the Release or threat of Release or
minimize the further release of any Environmental Hazard; or (iii)
investigate and determine if a remedial response is needed and to design such
a response and post-remedial investigation, monitoring, operation and
maintenance and care.
"REQUIREMENTS OF LAW" means, as to any Person, the Organizational
Documents of such Person, and any law, rule or regulation, or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject including, without limitation,
any certificate of occupancy, zoning ordinance, building, environmental or
land use requirement or Permit or environmental, labor, employment,
occupational safety or health law, ordinance, rule, regulation or common law.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Borrower or any Parent now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock or in any
junior class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition
for value, direct or indirect, of any shares of any class of Capital Stock of
the Borrower or any Parent now or hereafter outstanding, and (iii) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Capital Stock of the Borrower or any Parent now or
hereafter outstanding.
"SALES TAX ASSESSMENT ACT" means the Sales Tax Assessment Act of
1992 (Cwlth).
"SCHEDULED MATURITY DATE" means January 3, 1999.
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates of
interest, shares, or participations in temporary or interim certificates for
the purchase or acquisition of, or any right to subscribe to, purchase or
acquire any of the foregoing, but shall not include any evidence of the
Obligations.
"SOLVENT", when used with respect to any Person, means that at the
time of determination:
(i) the assets of such Person, at a fair valuation, are in
excess of the total amount of its
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debts (including, without limitation, contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
"SUBSIDIARY" of a Person means any corporation, limited liability
company, unlimited liability company, general or limited partnership, or
other entity which is a subsidiary of such Person within the meaning of part
1.2 of the Corporations Law or of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions with respect to such
entity are at the time directly or indirectly owned or controlled by such
Person, one or more of the other subsidiaries of such Person or any
combination thereof.
"TAXES" is defined in SECTION 3.03(a).
"TERM LOAN" is defined in SECTION 2.01(a).
"TERM LOAN COMMITMENT" means the obligation of the Lender to make its
Term Loan pursuant to the terms and conditions of this Agreement, which shall
be in an aggregate principal amount of $6,000,000, as permanently reduced
from time to time by payments or prepayments on the Term Loan made pursuant
to SECTION 2.01(d) or SECTION 3.01.
"TERMINATION EVENT" means (i) the institution by the any
Governmental Authority of proceedings to terminate any Employee Benefit Plan;
(ii) any Governmental Authority shall appoint or institute proceedings to
appoint a trustee to administer any Employee Benefit Plan; or (iii) the
partial of complete withdrawal of the Borrower from an Employee Benefit Plan.
"THIRD PARTY PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank or unit or equipment
owned, leased or operated by any Person other than the Borrower or any Parent
(including, without limitation, any surface water thereon or
adjacent thereto and soil and ground water thereunder).
"TRANSACTION COSTS" means the fees, costs and expenses payable by
KHI, KTI, the Borrower and their respective
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Subsidiaries in connection with the execution, delivery and performance of
the Transaction Documents.
"TRANSACTION DOCUMENTS" means (i) the Loan Documents, (ii) the KHI
Agreements, (iii) the KTI Loan Documents and (iv) the Recoil
Acquisition Documents.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as enacted
in the State of California, as it may be amended from time to time.
"VENDORS" means Recoil Australia, Advent Limited, Australian Pacific
Technology Limited, Western Pacific Investment Company Limited, Mr. Bruce Price,
B. Price Holdings Pty Limited and Lenarde Pty Ltd.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, PROVIDED, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month.
1.03. ACCOUNTING TERMS. Subject to SECTION 11.03, for purposes of
this Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.04. REFERENCES TO THIS AGREEMENT. The words "hereof", "herein",
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, subsection, clause, schedule and exhibit references herein are
references to articles, sections, subsections, clauses, schedules and exhibits
to this Agreement unless otherwise specified.
1.05. MISCELLANEOUS TERMS. All terms defined in this Agreement in
the singular shall have comparable meanings when used in the plural, and VICE
VERSA, unless otherwise specified. The term "including" is by way of example
and not limitation. A reference to a statute, ordinance, code or other
Requirement of Law includes regulations and other instruments under it and
consolidations, amendments, re-enactments or replacements of any
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of them. A reference to a Person includes a reference to the Person's
executors, administrators, successors, substitutes (including Persons taking
by novation) and assigns.
1.06. OTHER TERMS. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings assigned to
such terms by the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNTS AND TERMS OF TERM LOAN
2.01. TERM LOANS. (a) AMOUNT OF TERM LOAN. The Lender, subject
to the terms and conditions set forth in this Agreement, hereby agrees to
make a term loan, in Dollars, to the Borrower on the Effective Date, in an
aggregate amount equal to $6,000,000 (the "Term Loan").
(b) NOTICE OF BORROWING. When the Borrower desires to borrow the
Term Loan under this SECTION 2.01, it shall deliver to the Lender a Notice of
Borrowing, signed by it, on the Effective Date. Such Notice of Borrowing
shall specify (i) the amount of the proposed Borrowing, and (ii) instructions
for the disbursement of the proceeds of the proposed Borrowing. In lieu of
delivering such a Notice of Borrowing, the Borrower may give the Lender
telephonic notice of the Borrowing of the Term Loan on the Effective Date, if
it confirms such notice by delivery of the Notice of Borrowing to the Lender
promptly, but in no event later than 5:00 p.m. (Chicago time) on the same
day. Any Notice of Borrowing (or telephonic notice in lieu thereof) given
pursuant to this SECTION 2.01(b) shall be irrevocable.
(c) MAKING OF TERM LOAN. Promptly after receipt of a
Notice of Borrowing under SECTION 2.01(b) (or telephonic notice in lieu
thereof), the Lender shall deposit an amount equal to the amount requested by
the Borrower to be made in respect of the Term Loan under this SECTION
2.01(c), in immediately available funds, not later than 1:00 p.m. (Chicago
time) on the Effective Date. Subject to the fulfillment of the conditions
precedent set forth in SECTION 4.01, the Lender shall make the proceeds of
such amounts available to the Borrower by disbursing such proceeds on the
Effective Date to an account specified in a written notice from the Lender to
the Borrower or in accordance with the Borrower's disbursement instructions
set forth in such Notice of Borrowing.
(d) REPAYMENT OF THE TERM LOAN. (i) The outstanding
principal balance of the Term Loan shall be payable in full on the earlier of
(x) the Scheduled Maturity Date (or, if not a Business Day, the immediately
preceding Business Day), and (y) the date of acceleration of the Obligations
pursuant hereto.
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(ii) In addition to the scheduled payments on the Term Loan, the
Borrower may make the voluntary prepayments described in SECTION 3.01(a)(i)
and shall make the mandatory prepayments prescribed in SECTION 3.01(b), for
credit against such scheduled payments on the Term Loans pursuant to SECTION
3.01(a)(i) or SECTION 3.01(b), as applicable.
(e) USE OF PROCEEDS OF TERM LOAN. The proceeds of the
Term Loan shall be used (i) to pay that portion of the "Purchase Price" under
(and as defined in) the Recoil Australia Acquisition Agreement attributable
to the assets of Recoil Australia (other than the Capital Stock of Recoil
Belgium and Recoil U.K.) and (iii) for working capital in the ordinary course
of the Borrower's business and for other lawful general corporate purposes.
2.02. INTEREST. (a) RATE OF INTEREST. The Term Loan and the
outstanding principal balance of all other Obligations shall bear interest on
the unpaid principal amount thereof from the date the Term Loan is made and
such other Obligations are due and payable until paid in full, except as
otherwise provided in SECTION 2.02 (c), at a rate per annum equal to the sum
of (i) the Index Rate, as in effect from time to time as interest accrues,
PLUS (ii) one and one-half percent (1.50%).
(b) INTEREST PAYMENTS. (i) Interest accrued on the Term Loan shall
be payable in arrears (A) with respect to interest accrued and unpaid as of
the end of any calendar month, on the first day of the immediately succeeding
calendar month, commencing on the first such day following the making of the
Term Loan, (B) upon the payment or prepayment of the Term Loan in full, and
(C) if not theretofore paid in full, at maturity (whether by acceleration or
otherwise) of the Term Loan.
(ii) Interest accrued on the principal balance of all other
Obligations shall be payable in arrears (A) on the last day of each calendar
month, commencing on the first such day following the incurrence of such
Obligation, (B) upon repayment thereof in full or in part, and (C) if not
theretofore paid in full, at the time such other Obligation becomes due and
payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTION 2.02(a) or elsewhere in this Agreement, effective
immediately upon (i) the occurrence of an Event of Default described in
SECTION 10.01(a) or (ii) the occurrence of any other Event of Default and
notice from the Lender of the effectiveness of this SECTION 2.02(c), and for
as long thereafter as such Event of Default shall be continuing, the
principal balance of the Term Loan, and the principal balance of all other
Obligations, shall bear interest at a rate which is three and one-half
percent (3.50%) per annum in excess of the Index Rate.
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(d) COMPUTATION OF INTEREST. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on the
Term Loan, the date of the making of the Loan shall be included and the
date of payment shall be excluded; PROVIDED, HOWEVER, that if a Loan is
repaid in accordance with the terms hereof on the same day prior to 1:00 p.m.
(Chicago time) on which it is made, no interest shall be paid on the Term
Loan.
(e) INTEREST FOLLOWING JUDGMENT OR ORDER. If any of the
Obligations becomes merged in a judgment or order, then the Borrower agrees
to pay interest to the Lender on the amount of that Obligation as an
independent Obligation. This interest accrues from the date the Obligation
becomes due for payment both before and after the judgement or order until it
is paid in full, at a rate which is the higher of (i) the rate payable under
the judgment or order and (ii) the rate referred to in SECTION 2.02(c).
2.03. AUTHORIZED OFFICERS AND AGENTS. On the Effective Date and
from time to time thereafter when necessary, the Borrower shall deliver to
the Lender an Officer's Certificate setting forth the names of the officers,
employees and agents authorized to request the Term Loan and containing a
specimen signature of each such officer, employee or agent. The officers,
employees and agents so authorized shall also be authorized to act for the
Borrower in respect of all other matters relating to the Loan Documents. The
Lender shall be entitled to rely conclusively on such officer's or employee's
authority to request the Term Loan until the Lender receives written notice
to the contrary. The Lender shall have no duty to verify the authenticity of
the signature appearing on any written Notice of Borrowing or any other
document, and, with respect to an oral request for such a Loan the
Lender shall have no duty to verify the identity of any person representing
himself or herself as one of the officers, employees or agents authorized to
make such request or otherwise to act on behalf of the Borrower. The Lender
shall incur no liability to the Borrower or any other Person in acting upon
any telephonic notice referred to above which the Lender believes in good
faith to have been given by a duly authorized officer or other person
authorized to borrow on behalf of the Borrower.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. PREPAYMENTS; REDUCTIONS IN TERM LOAN COMMITMENT.
(a) VOLUNTARY PREPAYMENTS/REDUCTIONS. (i) The Borrower may, upon
at least one (1) Business Day's prior written notice to the Lender, at any
time and from time to time, prepay the Term Loan, in whole or in part.
Unless the aggregate
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outstanding principal balance of the Term Loan is to be prepaid in full,
voluntary prepayments of the Term Loan shall be in an aggregate minimum
amount of $100,000 and integral multiples of $100,000 in excess of that
amount. Each voluntary prepayment shall be applied to the unpaid
installments of the Term Loan in the forward order of maturity and shall
premanently reduce the Term Loan Commitment of the Lender. Any notice of
prepayment given to the Lender under this SECTION 3.01(a)(i) shall specify
the date (which shall be a Business Day) of prepayment and the aggregate
principal amount of the prepayment. When notice of prepayment is delivered
as provided herein, the principal amount of the Term Loan specified in the
notice shall become due and payable on the prepayment date specified in such
notice.
(ii) The repayments and prepayments in respect of reductions and
terminations described in this SECTION 3.01(a) may be made without premium or
penalty.
(b) MANDATORY PREPAYMENTS/REDUCTIONS.
(i) Within two (2) Business Days after the Borrower's or any
Parent's receipt of any Net Cash Proceeds of Sale, the Borrower shall
make or cause to be made a mandatory prepayment of the Obligations in an
amount equal to one hundred percent (100%) of such Net Cash Proceeds of Sale.
(ii) After the payment in full of the "Obligations" under (and as
defined in) the KTI Credit Agreement, within ninety (90) days after the end
of each Fiscal Year, the Borrower shall calculate Excess Cash Flow for such
Fiscal Year and shall make a mandatory prepayment in an amount equal to
seventy-five percent (75%) of such Excess Cash Flow. The Borrower shall make
an additional mandatory prepayment on the date on which annual reports are
required to be delivered by SECTION 6.01(c) to the extent 75% of Excess Cash
Flow determined in accordance with the annual reports exceeds 75% of the
Borrower's preliminary calculation of Excess Cash Flow.
(iii) Within two (2) Business Days after the Borrower's or any
Parent's receipt of any Excess Proceeds of Issuance of Stock or
Indebtedness, the Borrower shall make or cause to be made a mandatory
prepayment in an amount equal to one hundred percent (100%) of such Excess
Proceeds of Issuance of Stock or Indebtedness.
(iv) Nothing in this SECTION 3.01(b) shall be construed to
constitute the Lender's consent to any transaction referred to in CLAUSES (i)
or (iii) above which is not expressly permitted by ARTICLE VIII.
(v) Each mandatory prepayment required by CLAUSES (i), (ii) and
(iii) of this SECTION 3.01(b) shall be referred to herein as a "Designated
Prepayment". The Borrower shall give the Lender not less than one (1)
Business Day's prior written notice
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or telephonic notice promptly confirmed in writing, of the date on which each
such Designated Prepayment will be made (which date of prepayment shall be no
later than the date on which such Designated Payment becomes due and payable
pursuant to this SECTION 3.01(b)).
(iv) Designated Prepayments shall be allocated and applied to the
unpaid principal balance of the Term Loan.
3.02. PAYMENTS. (a) MANNER AND TIME OF PAYMENT. All payments and
prepayments of principal of and interest on the Term Loan and other
Obligations (including, without limitation, fees and expenses) which are
payable to the Lender shall be made without condition or reservation of
right, in immediately available funds, delivered to the Lender not later than
1:00 p.m. (Chicago time) on the date and at the place due, to such account of
the Lender as it may designate; and funds received by the Lender not later
than 1:00 p.m. (Chicago time) on any given Business Day shall be credited
against payment to be made that day and funds received by the Lender after
that time shall be deemed to have been paid on the immediately following
Business Day. All payments and prepayments of Obligations shall be made in
Dollars, and the Borrower waives any right which it has under any Requirement
of Law to repay the Obligations in a currency other than Dollars. If the
Lender receives payment in a currency other than Dollars, the Lender may
convert the amount received into Dollars at the spot rate at which the Lender
is able to purchase Dollars with the amount received at the time of receipt
of the other currency. The Borrower satisfies its obligation to make payments
in Dollars only to the extent of the amount of the Dollars purchased after
deducting any costs of conversion. The Borrower acknowledges that it may be
necessary for the Lender to convert amounts received through a currency other
than Dollars to ascertain the Dollar equivalent of the amount received.
(b) APPLICATION OF PAYMENTS. (i) Subject to the provisions of
SECTIONS 3.01 AND 3.02(b)(ii), all payments of principal and interest in respect
of the Term Loan, all payments of fees and all other payments in respect of any
other Obligations, shall be applied FIRST, to pay all Obligations then due and
payable and SECOND, as the Borrower so designates.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Lender shall apply all payments in respect of any Obligations
and all proceeds of Collateral in the following order:
(A) FIRST, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lender;
(B) SECOND, to pay interest due in respect of the Supplemental
Term Loan;
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(C) THIRD, to the payment or prepayment of principal
outstanding on the Term Loan; and
(D) FOURTH, to the payment of all other Obligations.
(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
by the Borrower hereunder is stated to be due on a day which is not a
Business Day, the payment shall instead be due on the immediately following
Business Day, and any such extension of time shall be included in the
computation of the payment of interest and fees hereunder.
3.03. TAXES. (a) PAYMENT OF TAXES. Any and all payments by the
Borrower hereunder or other document evidencing any Obligations shall be
made, in accordance with SECTION 3.02, free and clear of and without
reduction for any and all present or future taxes, levies, imposts,
deductions, charges, withholdings, duties, and all stamp, transaction or
documentary taxes, excise taxes, ad valorem taxes and other taxes imposed on
the value of the Property, charges or levies which arise from the execution,
delivery or registration, or from payment or performance under, or otherwise
with respect to, any of the Loan Documents or the Term Loan Commitment and
all other liabilities with respect thereto (including any related interest,
penalties, fines and expenses in connection with any of them), excluding
taxes imposed on or measured by net income or overall gross receipts and
capital and franchise taxes imposed on the Lender by (i) the United States,
(ii) the Governmental Authority of any jurisdiction in which the Lender has
an office or any political subdivision thereof or (iii) the Governmental
Authority in which the Lender is organized, managed and controlled or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and duties being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to withhold or deduct any
Taxes from or in respect of any sum payable hereunder or any such document to
the Lender (x) the sum payable to the Lender shall be increased as may be
necessary so that after making all required withholding or deductions
(including withholding or deductions applicable to additional sums payable
under this SECTION 3.03) the Lender receives an amount equal to the sum it
would have received had no such withholding or deductions been made, (y) the
Borrower shall make such withholding or deductions, and (z) the Borrower
shall pay the full amount withheld or deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) INDEMNIFICATION. The Borrower will indemnify the Lender
against, and reimburse the Lender on demand for, the full amount of all Taxes
(including, without limitation, any Taxes imposed by any Governmental Authority
on amounts payable under this SECTION 3.03 and any additional income or
franchise taxes resulting therefrom) incurred or paid by the Lender or any of
its Affiliates and any liability (including penalties, additions to
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tax, interest, and out-of-pocket expenses paid to third parties) arising
therefrom or with respect thereto, whether or not such Taxes were lawfully
payable. A certificate as to any additional amount payable to any Person
under this SECTION 3.03 submitted by it to the Borrower shall, absent
manifest error, be final, conclusive and binding upon all parties hereto.
The Lender agrees, within a reasonable time after receiving a written request
from the Borrower, to provide the Borrower with such certificates as are
reasonably required, and take such other actions as are reasonably necessary
to claim such exemptions as the Lender may be entitled to claim in respect of
all or a portion of any Taxes which are otherwise required to be paid or
deducted or withheld pursuant to this SECTION 3.03 in respect of any payments
under this Agreement.
(c) RECEIPTS. Within thirty (30) days after the date of any
payment of Taxes by the Borrower, it will furnish to the Lender, at its
address referred to in SECTION 11.06, the original or a certified copy of a
receipt evidencing payment thereof.
(d) INCOME TAX ASSESSMENT ACT MATTERS.
(i) The Borrower acknowledges that section 261 of the Income Tax
Assessment Act may render void its Obligation to make payment under this
SECTION 3.03. However, the Borrower convenants that even if this is the case,
and the Borrower would not otherwise be obliged to make the payment as a
result thereof, it will make the payments contemplated by this SECTION 3.03
and that the making of such payment is in the best interest of Borrower. The
Borrower acknowledges that the Lender has materially relied on the covenant
in this SECTION 3.03(d)(i) in entering into this Agreement and breach of such
covenant would materially harm the Lender.
(ii) The Borrower waives any right it may have to any reimbursement
of money paid under this SECTION 3.03 or in accordance with the Borrower's
covenant contained in SECTION 3.03(d)(i). The Borrower also releases the
Lender from any Claim the Borrower may have against the Lender or any of its
affiliates to refund or repay amounts so paid whether the Claim arises by
reason of the Obligation under this SECTION 3.03 being void under section 261
of the Income Tax Assessment Act or by reason of money paid under mistake of
any nature or for any other reason.
3.04. PROMISE TO REPAY; EVIDENCE OF INDEBTEDNESS.
(a) PROMISE TO REPAY. The Borrower hereby agrees to pay when due
the principal amount of the Term Loan which is made to it, and further agrees
to pay all unpaid interest accrued thereon, in accordance with the terms of
this Agreement.
(b) LOAN ACCOUNT. The Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to
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the Lender resulting from the Term Loan owing to the Lender from time to
time, including the amount of principal and interest payable and paid to the
Lender from time to time hereunder.
(c) ENTRIES BINDING. The entries made in the Loan Account shall be
conclusive and binding for all purposes, absent manifest error.
ARTICLE IV
CONDITIONS TO TERM LOAN
4.01. CONDITIONS PRECEDENT TO EFFECTIVE DATE. The obligation of
the Lender to make the Term Loan on the Effective Date shall be subject to
the satisfaction of all of the following conditions precedent:
(a) DOCUMENTS. The Lender shall have received on or before the
Effective Date all of the following, each duly executed, acknowledged,
stamped and registered where appropriate and in form and substance
satisfactory to the Lender:
(i) this Agreement, together with all Schedules hereto which shall
be in each case true, complete and correct in all material respects as
of the Effective Date;
(ii) a Notice of Borrowing completed in accordance with the provisions
of SECTION 2.01(b);
(iii) the Fixed and Floating Charge, together with all schedules
thereto which shall be in each case true, complete and correct in all
material respects as of the Effective Date:
(iv) a certified copy of the extract of the meeting of the board of
directors of each of the Borrower and each Parent evidencing the
resolutions authorizing the execution, delivery and performance of the
Loan Documents to which such Person is a party;
(v) the Parent Pledge Agreements and the Parent Guaranty and Uniform
Commercial Code financing statements for filing in jurisdictions
with respect to the Property subject to the Charge Over Shares;
(vi) favorable legal opinions, each dated the Effective Date, addressed
to the Lender (or with respect to which the Lender has been issued a
reliance letter) from the following counsel:
(A) O'Melveny & Myers LLP, United States counsel to the
Borrower, Recoil Australia Holdings
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and Recoil Holdings, with respect to the Loan Documents and
related matters;
(B) Corrs Chambers Westgarth, Australian counsel to the
Borrower, Recoil Australia Holdings and Recoil Holdings, with
respect to the Loan Documents, the Recoil Australia Acquisition
Agreement and related matters; and
(C) Norton Smith Gledhill, Australian counsel to Recoil
Australia and certain of the Vendors, with respect to the
Recoil Australia Acquisition Agreement and related matters;
and
(D) Logie-Smith Lanyon, Australian counsel to certain of the
Vendors, with respect to the Recoil Acquisition Documents and
related matters;
(vii) evidence that the Borrower and each Parent have directed its
counsel to prepare and deliver to the Lender the respective opinions
described in SUBCLAUSES (A) and (B) of CLAUSE (vii) above and that
Recoil Australia and the Vendors have directed their respective counsel
to prepare and deliver to the Lender the respective opinions described
in SUBCLAUSES (C) and (D) of CLAUSE (ix) above;
(viii) a certificate signed by a director of the Borrower certifying
that all conditions precedent under this SECTION 4.01 have been met and
no Potential Event of Default or Event of Default has occurred or is
continuing;
(ix) a solvency certificate for the Borrower and each Parent,
duly executed by a director of such Person, dated the Effective Date
and giving effect to the Recoil Australia and the financing transactions
contemplated under this Agreement, supported by such analyses, valuations,
appraisals, reviews, projections and other documentation as the Lender
deems appropriate;
(x) the PRO FORMA financials referred to in SECTION 5.01(g);
(xi) originals of all powers of attorney under which any of the
Loan Documents are executed;
(xii) such additional documentation as the Lender may reasonably
request.
(b) PERFECTION OF LIENS. Evidence that the Fixed and Floating
Charge and the Parent Pledge Agreements have been filed, stamped and/or
registered where necessary to record or perfect the Lender's security
interest in the respective Collateral subject thereto, certificates
representing Capital Stock included
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in the Collateral (including the Capital Stock of RCL) have been delivered to
the Lender (with duly executed stock powers) and all recording fees and stamp
and filing taxes have been paid.
(c) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Lender shall not have
received any notice that litigation is pending or threatened which is likely
to (i) enjoin, prohibit or restrain (A) the making of the Term Loan on the
Effective Date, (B) the Parents' entering into the Parent Guaranty on the
Effective Date or (C) the consummation of the Recoil Acquisition or (ii)
impose or result in the imposition of a Material Adverse Effect.
(d) NO DEFAULT. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
Term Loan on the Effective Date or the Parents' entering into the Parent
Guaranty on the Effective Date.
(e) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in SECTION 5.01 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Effective
Date.
(f) THE RECOIL ACQUISITION. (i) The Lender shall be satisfied in
all material respects (A) with the terms, form and substance of the Recoil
Acquisition and the Recoil Acquisition Documents, including, without
limitation, the resolutions with respect to the Recoil Acquisition adopted by
the respective boards of directors of the Borrower, KTI, Recoil Australia,
Recoil U.S. and the other parties to the respective Recoil Acquisition
Agreements, (B) that the parties to the Recoil Acquisition Agreements have
complied with all applicable Requirements of Law in connection with the
Recoil Acquisition, (C) that all conditions precedent to, and all consents
necessary to permit, the Recoil Acquisition pursuant to the Recoil
Acquisition Documents shall have been satisfied or delivered, or waived with
the prior written consent of the Lender, (D) that all Liens
encumbering the assets being purchased in the Recoil Acquisition have been
terminated (other than Liens permitted by SECTION 8.03) and (E) that the
Recoil Acquisition Documents have not been amended or modified without the
prior written consent of the Lender and are in full force and effect.
(ii) Substantially simultaneously with the consummation of the
transactions contemplated by this Agreement, the KHI Loan Agreement and the
KTI Credit Agreement, the Borrower, KTI and, if designated by KTI to acquire
the shares of Recoil U.K., Kaynar U.K. shall have acquired substantially all
of the assets of Recoil Australia pursuant to the Recoil Australia
Acquisition Agreement and related documents in compliance with all applicable
Requirements of Law.
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(g) ORGANIZATIONAL DOCUMENTS. The Lender shall have received
copies, certified to its satisfaction, of the Organizational Documents of the
Borrower and each Parent as in effect as of the Effective Date and determined
them to be satisfactory in form and substance.
(h) NO MATERIAL ADVERSE EFFECT. No event has occurred since
December 31, 1995 which has had or is reasonably likely to have a Material
Adverse Effect.
(i) FEES AND EXPENSES PAID. There shall have been paid to the
Lender all fees and expenses due and payable on or before the Effective Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Agreement and to make the Term Loan and the other
financial accommodations to the Borrower, the Borrower hereby represents and
warrants to the Lender that the following statements are true, correct and
complete:
(a) ORGANIZATION; ORGANIZATIONAL POWERS. The Borrower and each
Parent (i) is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (ii) is duly qualified to do
business as a foreign corporation (or other entity) and is in good standing
under the laws of each jurisdiction in which failure to be so qualified and
in good standing will have or is reasonably likely to have a Material Adverse
Effect, and (iii) has all requisite corporate power and authority to own,
operate and encumber its Property and to conduct its business as proposed to
be conducted in connection with and following the consummation of the
transactions contemplated by the Transaction Documents.
(b) AUTHORITY. (i) The Borrower and each Parent have the
requisite corporate power and authority (A) to execute, deliver and perform
each of the Transaction Documents which are to be executed by it in
connection with the Recoil Acquisition or which have been executed by it as
required by this Agreement on or prior to the Effective Date and (B) to file
the Transaction Documents which must be filed by it in connection with the
Recoil Acquisition or which have been filed by it as required by this
Agreement on or prior to the Effective Date, with any Governmental Authority.
(ii) The execution, delivery, performance and filing, as the case
may be, of each of the Transaction Documents which must be executed or filed
by the Borrower or any Parent in connection with the Recoil Acquisition or
which have been executed or filed as required by this Agreement on or prior
to the Effective Date and to which the Borrower or any Parent is
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party and the consummation of the transactions contemplated thereby, have
been duly approved by the respective boards of directors and, if necessary,
the shareholders of the Borrower and each Parent and such approvals have not
been rescinded. No other organizational action or proceedings on the part of
the Borrower or any Parent are necessary to consummate such transactions.
(iii) Each of the Transaction Documents to which the Borrower or
any Parent is a party has been duly executed, delivered or filed, as the case
may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, is in full force and
effect and no material term or condition thereof has been amended, modified
or waived from the terms and conditions contained in the Transaction
Documents delivered to the Lender pursuant to SECTION 4.01(a) without the
prior written consent of the Lender, and all parties thereto have performed
and complied with all the terms, provisions, agreements and conditions set
forth therein and required to be performed or complied with by such parties
on or before the Effective Date, and no Potential Event of Default, Event of
Default or breach of any covenant by any such party exists thereunder.
(iv) Neither the Borrower nor any Parent have entered into any
Transaction Document in the capacity of a trustee of any trust or settlement.
(v) All of the obligations of the Borrower and each Parent under
any Loan Document to which such Person is a party rank at least equally with
all other senior, secured Indebtedness of such Person, except Indebtedness
mandatorily preferred by law or as otherwise permitted hereunder or under the
Loan Documents, including Indebtedness permitted by SECTION 8.01 and Liens
permitted by SECTION 8.03.
(c) CONSENTS. Except as set forth in SCHEDULE 5.01-C no consents
or approvals of, or filings or registrations (other than filings or
registrations contemplated by SECTION 4.01(b) or 5.01(f)(i) with respect to
Government Contracts) by the Borrower or any Parent with any Governmental
Authority or any other Person not a party to this Agreement are necessary in
connection with the execution and delivery of the Transaction Documents by
the Borrower and the Parents and the consummation by the Borrower and the
Parents of the transactions contemplated by the Transaction Documents, except
where the failure to obtain such consents or approvals would not result in a
Material Adverse Effect.
(d) SUBSIDIARIES; OWNERSHIP OF CAPITAL STOCK. SCHEDULE 5.01-D
accurately sets forth (i) the correct legal name, the jurisdiction of
incorporation and the jurisdictions in which qualified to transact business
as a foreign corporation of each of the direct and indirect Subsidiaries of
the Borrower and the Parents, (ii) the authorized, issued and outstanding
shares of each class of Capital Stock of the Parents, the Borrower and each
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of their respective Subsidiaries and the owners of such shares, and (iii) a
summary of the direct and indirect partnership, joint venture, or other
equity interests, if any, of the Borrower and any each Parent in any Person
that is not a corporation. None of such issued and outstanding Capital Stock
is subject to any vesting, redemption, or repurchase agreement, and there are
no warrants or options outstanding with respect to such Capital Stock. The
outstanding Capital Stock of the Borrower and each Parent is duly authorized,
validly issued, fully paid and nonassessable.
(e) NO CONFLICT. The execution, delivery and performance of each
of the Transaction Documents to which the Borrower or any Parent is a party
do not and will not (i) conflict with the Organizational Documents of the
Borrower or any Parent, (ii) constitute a tortious interference with any
Contractual Obligation of any Person or conflict with, result in a breach of
or constitute (with or without notice or lapse of time or both) a default
under any Requirement of Law or Contractual Obligation of the Borrower or any
Parent, or require termination of any Contractual Obligation, the
consequences of which violation, breach, default or termination, singly or in
the aggregate, will have or is reasonably likely to have a Material Adverse
Effect or is reasonably likely to subject the Lender to any liability, or
(iii) result in or require the creation or imposition of any Lien whatsoever
upon any of the Property or assets of the Borrower or any Parent, other than
Liens contemplated by the Loan Documents.
(f) PATENTS, TRADEMARKS, PERMITS, ETC.; GOVERNMENT APPROVALS. (i)
After giving effect to the Recoil Acquisition, the Borrower and each Parent
own, are licensed or otherwise have the lawful right to use, or have all
permits and other governmental approvals (except with respect to Government
Contracts), patents, trademarks, trade names, copyrights, technology,
know-how and processes used in or necessary for the conduct of their
businesses as proposed to be conducted which are material to their condition
(financial or otherwise), operations, performance and prospects, taken as a
whole, including, without limitation, the name "Recoil". With respect to
each Government Contract acquired by the Borrower in connection with the
Recoil Acquisition, such Government Contract has been transferred to the
Borrower (and all necessary approvals therefor have been obtained) or the
Borrower is operating under a subcontract which is in full force and
effect.
(ii) The consummation of the Recoil Acquisition and the
transactions contemplated by the Transaction Documents will not impair the
ownership of or rights under (or the license or other right to use, as the
case may be) any permits and governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how or processes by the Borrower or
any Parent in any manner which has or is reasonably likely to have a Material
Adverse Effect.
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(g) PRO FORMA FINANCIALS. The PRO FORMA consolidated and
consolidating balance sheets of KHI and its Subsidiaries prepared as of March
31, 1996 (and giving effect to the Recoil Acquisition) and in accordance with
GAAP consistently applied, copies of which have been furnished to the Lender
on or before the Effective Date, fairly present on a PRO FORMA basis the
financial condition of KHI and it's Subsidiaries as of March 31, 1996, and
reflect on a PRO FORMA basis those liabilities reflected in the notes thereto
and resulting from consummation of the transactions contemplated by the
Transaction Documents, and the payment or accrual of all Transaction Costs
payable on the Effective Date with respect to any of the foregoing. The
projections and assumptions expressed in the PRO FORMA financials furnished
pursuant to this SECTION 5.01(g) are reasonable based on the information
available to the Borrower as of the date hereof.
(h) SOLVENCY. After giving effect to the Term Loan to be made on
the Effective Date, and the disbursement of the proceeds of the Term Loan
pursuant to the Borrower's instructions (if any), the Borrower and each
Parent are Solvent.
(i) THE RECOIL ACQUISITION. (i) All conditions precedent to, and
all consents necessary to permit, the Recoil Acquisition pursuant to the
Recoil Acquisition Documents have been satisfied or delivered, or waived with
the prior written consent of the Lender, and no material breach of any term
or provision of any Recoil Acquisition Document has occurred and no action
has been taken by any competent authority which restrains, prevents or
imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, the Recoil Acquisition or the making
of the Term Loan hereunder.
(ii) After giving effect to the Recoil Acquisition, and the
Borrower, KTI and, if designated by KTI to acquire the shares of Recoil U.K.,
Kaynar U.K. have acquired substantially all of the assets of Recoil Australia
pursuant to the Recoil Australia Acquisition Agreement and related documents
in compliance with all applicable Requirements of Law.
(j) PLEDGE OF COLLATERAL. The grant and perfection of the security
interest in the Capital Stock of the Borrower constituting a portion of the
Collateral for the benefit of the Lender, as contemplated by the terms of the
Parent Pledge Agreements, is not made in violation of the registration
provisions of the Securities Act of 1933, any applicable provisions of other
federal securities laws, state securities or "Blue Sky" law, foreign
securities law, or applicable general corporation, limited liability company,
unlimited liability company or partnership law or in violation of any other
Requirement of Law.
(k) GOVERNMENTAL REGULATION. Neither the Borrower, nor any Parent
is subject to regulation under the Public Utility
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Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce
Act, or the Investment Company Act of 1940, or any other foreign, federal or
state statute or regulation which limits its ability to incur indebtedness or
its ability to consummate the transactions contemplated hereby or by the
Recoil Acquisition Agreements.
(l) RESTRICTED JUNIOR PAYMENTS. Since the respective dates of
incorporation of the Borrower and the Parents, neither the Borrower nor any
Parent has directly or indirectly declared, ordered, paid or made or set
apart any sum or Property for any Restricted Junior Payment or agreed to do
so, except as permitted pursuant to SECTION 8.06.
(m) BANK ACCOUNTS. Each bank, trust company or other financial
institution at which the Borrower or any Parent maintains any deposit account
has executed and delivered to the Lender a Collection Account Agreement with
respect to such deposit account(s).
(n) LITIGATION; ADVERSE EFFECTS. Except as set forth in SCHEDULE
5.01-N, there is no action, suit proceeding, investigation or arbitration
before or by any Governmental Authority or private arbitrator pending or, to
the best of Borrower's knowledge, threatened against the Borrower or any
Parent or any Property of any of them (i) challenging the validity or the
enforceability of any of the Transaction Documents or (ii) which will or is
reasonably likely to result in any Material Adverse Effect. There is no
material loss contingency within the meaning of GAAP which has not been
reflected in the consolidated financial statements of the Borrower. Neither
the Borrower nor any of its Subsidiaries is (x) in violation of any
applicable Requirements of Law which violation will have or is reasonably
likely to have a Material Adverse Effect, or (y) subject to or in default
with respect to any final judgment, writ, injunction, restraining order or
order of any nature, decree, rule or regulation of any court or Governmental
Authority which will have or is reasonably likely to have a Material Adverse
Effect.
(o) NO MATERIAL ADVERSE CHANGE. Since the Effective Date, there has
occurred no event which has had or is reasonably likely to have a Material
Adverse Effect.
(p) PERFORMANCE. Neither the Borrower nor any Parent has received
notice or has actual knowledge that (i) it is in default in the performance,
observance or fulfillment of any of the material obligations, covenants or
conditions contained in any Contractual Obligation applicable to it, or (ii)
any condition exists which, with the giving of notice or the lapse of time or
both, would constitute a default with respect to any such Contractual
Obligation.
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(q) DISCLOSURE. The representations and warranties of the Borrower
and the Parents contained in the Transaction Documents, and all certificates
and other documents delivered to the Lender pursuant to the terms thereof, do
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. The Borrower has not intentionally withheld any fact from the
Lender in regard to any matter which will have or is reasonably likely to
have a Material Adverse Effect.
(r) REQUIREMENTS OF LAW. The Borrower and the Parents are in
compliance with all Requirements of Law applicable to them and their
respective businesses, in each case where the failure to so comply
individually or in the aggregate will have or is reasonably likely to have a
Material Adverse Effect.
(s) EMPLOYEE BENEFIT MATTERS. The Borrower does not maintain or
contribute to any Employee Benefit Plan other than those listed on SCHEDULE
5.01-S hereto. Each Employee Benefit Plan is in compliance in all material
respects with all laws, regulations and rules applicable thereto and the
respective requirements of the governing documents for such Employee Benefit
Plan. The aggregate of the liabilities to provide all of the accrued benefits
under any Pension Plan does not exceed the current Fair Market Value of the
assets held in the trust or other funding vehicle for such Pension Plan. With
respect to any Employee Benefit Plan maintained or contributed to by the
Borrower (other than a Pension Plan), reasonable reserves have been
established to the extent required by prudent business practice or where
required by ordinary accounting practices in the jurisdiction in which such
Employee Benefit Plan is maintained. The aggregate unfunded liabilities,
after giving effect to any reserves for such liabilities, with respect to
such Employee Benefit Plans does not exceed the current Fair Market Value of
the assets held in the trust or other funding vehicle (or reserves) for such
Employee Benefit Plan. There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against the Borrower with
respect to any Employee Benefit Plan.
(t) LABOR MATTERS. SCHEDULE 5.01-T accurately sets forth all labor
contracts to which the Borrower or any Parent is a party on the date hereof
and the expiration date of each such contract. There are no strikes, lockouts
or other disputes relating to any collective bargaining or similar agreement
to which the Borrower or any Parent is a party.
(u) INSURANCE. SCHEDULE 5.01-X of the KTI Credit Agreement
accurately sets forth as of the date delivered to the Lender all insurance
policies and programs currently in effect with respect to the respective
Property and assets and business of the Borrower and the Parents, specifying
for each such policy
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and program, (i) the amount thereof, (ii) the risks insured against thereby,
(iii) the name of the insurer and each insured party thereunder, (iv) the
policy or other identification number thereof, (v) the expiration date
thereof and (vi) the annual premium with respect thereto. Such insurance
policies and programs are in amounts sufficient to cover the replacement
value of the respective Property and assets of the Borrower and the Parents.
(v) GOVERNMENT CONTRACT MATTERS. Except as set forth in SCHEDULE
5.01-V:
(i) The Borrower is in compliance with all material terms and
conditions of all Government Contracts, including all clauses, provisions
and requirements incorporated expressly, by reference or by operation of
law therein;
(ii) The Borrower is in compliance with all material terms and
conditions of all Requirements of Law and all Contractual Obligations
pertaining to any Government Contract;
(iii) All representations and certifications executed or
acknowledged or set forth in or pertaining to each Government Contract were
complete, accurate, correct and truthful as of the date such representations
or certifications were made, and the Borrower has complied in all material
respects with all such representations and certifications since such date;
(iv) No Governmental Authority, any prime contractor,
subcontractor or other Person has notified the Borrower that the Borrower
has breached or violated any Requirement of Law, certification,
representation, clause, provision or requirement pertaining to any
Government Contract;
(v) No termination for default, termination for convenience,
cure notice or show cause notice is currently in effect with respect to
any Government Contract;
(vi) To the best of the Borrower's knowledge, no cost incurred
pertaining to any Government Contract has been questioned or challenged, is
the subject of any investigation or has been disallowed by any Governmental
Authority;
(vii) To the best of the Borrower's knowledge, no money due to the
Borrower pertaining to any Government Contract has been withheld, or has
been the subject of an attempt to withhold, or reduced through exercise
of a right of set-off or otherwise;
(viii) there is no action, suit, investigation or proceeding
relating to any Government Contract, or relating
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to any proposed suspension or debarment of the Borrower or any of its
employees or agents, pending against (or, to the best of the Borrower's
knowledge, threatened against) the Borrower, such other Person or any
Property;
(ix) Neither the Borrower nor any of its directors, officers or
employees is (or during the last five (5) years has been) suspended or
debarred from doing business with any Governmental Authority or is (or
during such period was) the subject of a finding of nonresponsibility or
ineligibility for government contracting;
(x) (A) To the best of the Borrower's knowledge, none of the
Borrower's directors, officers, employees, consultants or agents is (or
during the last five (5) years has been) under administrative, civil or
criminal investigation, indictment or information by any Governmental
Authority with respect to any alleged irregularity, misstatement or omission
arising under or relating to any Government Contract, (B) during the last
five (5) years, the Borrower has not conducted or initiated any internal
investigation or audit or made a voluntary disclosure to any Governmental
Authority, with respect to any alleged irregularity, misstatement or
omission arising under or related to any Government Contract; and (C) the
Borrower has no knowledge or reason to know of any irregularity,
misstatement or omission arising under or relating to any Government
Contract that has led or could reasonably lead, either before or after
the Effective Date, to any of the consequences set forth in CLAUSE (A) or
(B) above or any other material damage, penalty assessment, recoupment of
payment or disallowance of cost;
(xi) There exist (A) no outstanding material Claims against the
Borrower or any Property, either by a Governmental Authority or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract; and (B) no material disputes between
the Borrower or any Parent, on the one hand, and any Governmental Authority,
any prime contractor, subcontractor, vendor or other third party, on the
other hand, arising under or relating to any Government Contract;
(xii) The Borrower's cost accounting and procurement systems with
respect to Government Contracts are in compliance in all material respects
with all applicable Requirements of Law; and
(xiii) All Government Contracts and bids (A) are being performed or
were submitted, as the case may be, in the ordinary course of business and
(B) are or would be, as the case may be, capable of performance in
accordance with their
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terms without loss (determined in accordance with the Borrower's
accounting principles, consistently applied).
(w) PAYMENT OF TAXES. All tax returns and reports of each of the
Borrower and the Parents required to be filed have been timely filed, and all
taxes, assessments, fees and other governmental charges thereupon and upon
their respective Property, assets, income and franchises which are shown in
such returns or reports to be due and payable have been paid, other than
those which are being contested in good faith by appropriate proceedings. The
Borrower has no knowledge of any proposed tax assessment (or similar claim)
against the Borrower or any Parent that will have or is reasonably likely to
have a Material Adverse Effect.
(x) BENEFIT OF TRANSACTION DOCUMENTS. The Company and each Parent
benefits by executing and delivering the Transaction Documents to which such
Person is a party and the interest charged by the Lender under the Loan
Documents is fair and reasonable.
(y) RELATED PARTY TRANSACTIONS. None of the parties to the Recoil
Acquisition Documents has contravened or will contravene section 243H or
section 243ZE of the Corporations Law by entering into or participating in
any Transaction Document or any transaction contemplated by any Transaction
Document, to the extent that such Requirements of Law are applicable to such
Persons and the Transaction Documents.
(z) TITLE TO PROPERTY. Each of the Borrower and each Parent is the
beneficial owner of, and has good and marketable title to, all Property held
by it or on its behalf and all undertakings carried on by such Person, free
from any Lien other than those permitted by this Agreement.
ARTICLE VI
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
6.01. FINANCIAL STATEMENTS. The Borrower shall maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of consolidated and consolidating financial
statements in conformity with GAAP, and each of the financial statements
described below shall be prepared from such system and records. The Borrower
shall deliver or cause to be delivered to the Lender:
(a) MONTHLY REPORTS. As soon as practicable, and in any event within
thirty (30) days after the end of each calendar
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month in each Fiscal Year, the consolidated and consolidating balance sheets of
the Borrower and the Parents as at the end of such period and the related
consolidated and consolidating statements of income, stockholders' equity and
cash flow of the Borrower and the Parents for such calendar month and for the
period from the beginning of the then current Fiscal Year to the end of such
calendar month, setting forth in each case in comparative form the corresponding
figures for the corresponding calendar periods in the previous Fiscal Year and
the corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered pursuant to SECTION 6.01(f), certified by a
director of the Borrower as fairly presenting the consolidated and consolidating
financial position of the Borrower and the Parents as at the dates indicated and
the results of their operations and cash flow for the calendar months indicated
in accordance with GAAP, subject to normal year end adjustments.
(b) QUARTERLY REPORTS. As soon as practicable, and in any event
within forty-five (45) days after the end of each fiscal quarter in each Fiscal
Year, the consolidated and consolidating balance sheets of the Borrower and
the Parents as at the end of such period and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and the Parents for such fiscal quarter and for the period from the
beginning of the then current Fiscal Year to the end of such fiscal quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures
from the consolidated financial forecast for the current Fiscal Year delivered
pursuant to SECTION 6.01(f), certified by a director of the Borrower as fairly
presenting the consolidated and consolidating financial position of the Borrower
and the Parents as at the dates indicated and the results of their operations
and cash flow for the periods indicated in accordance with GAAP, subject to
normal year end adjustments.
(c) ANNUAL REPORTS. As soon as practicable, and in any event
within one hundred twenty (120) days after the end of each Fiscal Year, (i)
the consolidated and consolidating balance sheets of the Borrower and the
Parents as at the end of such Fiscal Year and the related consolidated and
consolidating statements of income, stockholders' equity and cash flow of the
Borrower and the Parents for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the previous Fiscal Year and
the corresponding figures from the consolidated financial forecast for the
current Fiscal Year delivered pursuant to SECTION 6.01(f), and (ii) a report
thereon of Arthur Andersen & Co. or other independent certified public
accountants of recognized standing and otherwise acceptable to the Lender,
which report shall be unqualified and shall state that such financial
statements fairly present the consolidated and consolidating financial
position of each of the Borrower and the Parents as at the dates indicated
and the results of their
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operations and cash flow for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except for changes with which
Arthur Andersen & Co. or any such other independent certified public
accountants, if applicable, shall concur and which shall have been disclosed in
the notes to the financial statements) and that the examination by such
accountants in connection with such consolidated and consolidating financial
statements has been made in accordance with generally accepted auditing
standards.
(d) OFFICER'S CERTIFICATE. Together with each delivery of any
financial statement pursuant to PARAGRAPHS (b) and (c) of this SECTION 6.01,
(i) an Officer's Certificate of the Borrower substantially in the form of
EXHIBIT F attached hereto and made a part hereof, stating that the officer or
director signatory thereto has reviewed the terms of the Loan Documents, and
has made, or caused to be made under his supervision, a review in reasonable
detail of the transactions and consolidated and consolidating financial
condition of the Borrower and the Parents during the accounting period
covered by such financial statements, that such review has not disclosed the
existence during or at the end of such accounting period, and that such
officer or director does not have knowledge of the existence as at the date
of such Officer's Certificate, of any condition or event which constitutes an
Event of Default or Potential Event of Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action the Borrower or any Parent has taken, is taking and
proposes to take with respect thereto; and (ii) a certificate (the
"Compliance Certificate"), signed by a director of Borrower, setting forth
calculations and the methods of determination thereof (with such specificity
as the Lender may reasonably request) for the period then ended which
demonstrate compliance, when applicable, with the provisions of ARTICLE IX.
(e) ACCOUNTANT'S STATEMENT AND PRIVITY LETTER. Together with each
delivery of the financial statements referred to in SECTION 6.01(c), a written
statement of the firm of independent certified public accountants giving the
report thereon (i) stating that their audit examination has included a review of
the terms of this Agreement as it relates to accounting matters, (ii) stating
whether, in connection with their audit examination, any condition or event
which constitutes an Event of Default or Potential Event of Default has come to
their attention, and if such condition or event has come to their attention,
specifying the nature and period of existence thereof; PROVIDED, that such
accountants shall not be liable by reason of any failure to obtain knowledge of
any such condition or event that would not be disclosed in the course of their
audit examination, and (iii) stating that based on their audit examination
nothing has come to their attention which causes them to believe that the
information contained in either or both of the certificates delivered therewith
pursuant to SECTION 6.01(d) is not correct or that the matters set forth in the
Compliance
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Certificate delivered therewith pursuant to SECTION 6.01(d)(ii) for the
applicable Fiscal Year are not stated in accordance with the terms of this
Agreement. The statement referred to above shall be accompanied by (x) a
copy of the management letter or any similar report delivered to the Borrower
or to any officer, director or employee thereof by such accountants in
connection with such financial statements and (y) a letter from the Borrower
to such accountants informing such accountants that the Lender is relying
upon the financial statements audited by such accountants and delivered to
the Lender pursuant to SECTION 6.01(c) and that a primary intent of the
Borrower in having such financial statements audited is to induce the Lender
to continue to make financial accommodations to the Borrower under this
Agreement. The Lender may, with the consent of the Borrower (which consent
shall not be unreasonably withheld), communicate directly with such
accountants.
(f) BUDGETS; BUSINESS PLANS; FINANCIAL PROJECTIONS. As soon as
practicable and in any event not later than thirty (30) days prior to the
commencement of each Fiscal Year of the Borrower, (i) a monthly budget for such
Fiscal Year; (ii) an annual business plan for such Fiscal Year, in form and
substance acceptable to the Lender, accompanied by a report reconciling all
changes and departures from the business plan delivered to the Lender for the
preceding Fiscal Year; and (iii) a consolidated plan and financial forecast,
prepared in accordance with the Borrower's normal accounting procedures applied
on a consistent basis, for such Fiscal Year and the two (2) immediately
succeeding Fiscal Years, including, without limitation, (A) a forecasted
consolidated balance sheet and a consolidated statement of changes in financial
position of the Borrower for such Fiscal Years, (B) forecasted consolidated
balance sheets, statements of earnings and retained earnings, and changes in
financial position of the Borrower for and as of the end of each fiscal quarter
of such Fiscal Years, (C) the amount of forecasted Capital Expenditures and
Excess Cash Flow for such Fiscal Years, and (D) forecasted compliance with the
provisions of ARTICLE IX for such Fiscal Years.
6.02. OPERATIONS REPORTS. Accompanying the reports to be delivered
by the Borrower each fiscal quarter in each Fiscal Year pursuant to SECTION
6.01(b) and, in addition to the foregoing, within seven (7) days after the
Lender's request therefor, the Borrower shall deliver to the Lender a report
detailing the operations of the Borrower which report shall include a
management discussion and analysis with respect to the Borrower's financial
performance during such period, including a comparison of actual sales versus
budgeted sales for such fiscal quarter, a discussion of bookings, a listing
of significant new customers and new products developed for sale, an
explanation of any cost saving measures implemented, together with a
discussion of the general business environment and results of operations,
including an explanation of any material changes in consolidated and
consolidating statements of income, stockholders' equity and
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cash flow of the Borrower and the Parents for such period from such
statements for the corresponding period of the previous Fiscal Year and the
corresponding figures from the consolidated financial forecast for the
current Fiscal Year pursuant to SECTION 6.01(f) (the "Management Discussion
and Analysis").
6.03. COLLATERAL REPORTING. (a) Upon the request of the Lender,
the Borrower shall deliver to the Lender, in form and substance acceptable to
the Lender, a summary aged trial balance of all then existing Accounts
specifying the names, addresses, face amount and dates of invoices for each
Account the Borrower obligated on an Account so listed ("Schedule of
Accounts"), and upon demand, the original or copies, as request, of all
documents, including, without limitation, proofs of delivery, repayment
histories and present status reports, relating to the Accounts so scheduled
and such other matters and information relating to the status of Accounts as
the Lender shall reasonably request.
(b) Promptly upon, but in no event later than ten (10) Business
Days after, the Borrower's learning thereof, inform the Lender, in writing,
of (i) any material delay in the Borrower's performance of any of its
obligations to any material Account Debtor and of any assertion of any
material claims, offsets or counterclaims by any Account Debtor and of any
material allowances, credits or other monies granted by the Borrower to any
Account Debtor, and (ii) all material adverse information relating to the
financial condition of any material Account Debtor.
(c) Upon the request of the Lender, the Borrower shall deliver to
Lender, in form and substance acceptable to the Lender, a report summarizing,
on a LIFO and FIFO basis, the kind, type, quality and quantity of Inventory
as of the end of such month, the Borrower's cost therefor, and summaries of
Inventory by categories or classifications and by location.
(d) The Borrower shall provide the Lender with copies of all
agreements between the Borrower and any warehouse at which Inventory may from
time to time be kept and all leases or similar agreements between the
Borrower of any of its Affiliates and any other Person, whether the Borrower
or its Affiliate is lessor or lessee thereunder.
6.04. EVENTS OF DEFAULT. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Borrower obtaining knowledge (a) of any condition or event
which constitutes an Event of Default or Potential Event of Default, or
becoming aware that the Lender has given any notice with respect to a claimed
Event of Default or Potential Event of Default under this Agreement, (b) that
any Person has given any notice to the Borrower or any Parent or taken any
other action with respect to a claimed default or event or condition of the
type referred to
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in SECTION 10.01(e), or (c) of any condition or event which has or is
reasonably likely to have a Material Adverse Effect or affect the value of,
or the Lender's interest in, Collateral with a value in excess of $500,000 in
any material respect, the Borrower shall deliver to the Lender an Officer's
Certificate specifying (A) the nature and period of existence of any such
claimed default, Event of Default, Potential Event of Default, condition or
event, (B) the notice given or action taken by such Person in connection
therewith, and (C) what action the Borrower has taken, is taking and proposes
to take with respect thereto.
6.05. LAWSUITS. (a) Promptly upon the Borrower obtaining
knowledge of the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
the Borrower or any Parent or any Property of the Borrower or any Parent not
previously disclosed pursuant to SECTION 5.01(n), which action, suit,
proceeding, governmental investigation or arbitration exposes, or in the case
of multiple actions, suits, proceedings, governmental investigations or
arbitrations arising out of the same general allegations or circumstances
which expose, in the Borrower's reasonable judgment, the Borrower or any
Parent to liability in an amount aggregating $100,000 or more
(exclusive of claims covered by insurance policies of the Borrower or any
Parent unless the insurers of such claims have disclaimed coverage
or reserved the right to disclaim coverage on such claims), the Borrower
shall give written notice thereof to the Lender and provide such other
information as may be reasonably available to enable the Lender and its
counsel to evaluate such matters; (b) as soon as practicable and in any event
within forty-five (45) days after the end of each fiscal quarter of the
Borrower, the Borrower shall provide a written quarterly report to the Lender
covering the institution of, or written threat of, any action, suit,
proceeding, governmental investigation or arbitration (not previously
reported) against or affecting the Borrower or any Parent or any
Property of the Borrower or any Parent not previously disclosed
by the Borrower to the Lender, and shall provide such other information at
such time as may be reasonably available to enable the Lender and its counsel
to evaluate such matters (but excluding such information at to which the
Borrower in good faith has asserted or will assert a legal privilege in
objection to disclosure of the information by the Borrower in the action,
suit, proceeding, investigation or arbitration); and (c) in addition to the
requirements set forth in CLAUSES (a) and (b) of this SECTION 6.05, the
Borrower upon request of the Lender shall promptly give written notice of the
status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered pursuant to CLAUSE (a) or (b) above
and provide such other information as may be reasonably available to it to
enable the Lender and its counsel to evaluate such matters.
6.06. INSURANCE. As soon as practicable and in any event by the last
day of April in each Fiscal Year, the Borrower
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shall deliver to the Lender (a) a report in form and substance reasonably
satisfactory to the Lender outlining all material insurance coverage
maintained as of the date of such report by the Borrower and the duration of
such coverage and (b) evidence that all premiums with respect to such
coverage have been paid when due.
6.07. EMPLOYEE BENEFIT PLAN NOTICES. The Borrower shall deliver or
cause to be delivered to the Lender, at the Borrower's expense, the following
information and notices as soon as reasonably possible, and in any event:
(a) within ten (10) Business Days after the Borrower knows or has
reason to know that a Termination Event has occurred, a written
statement of the chief financial officer or a director of the Borrower
describing such Termination Event and the action, if any, which the
Borrower has taken, is taking or proposes to take with respect thereto,
and when known, any action taken or threatened by any Governmental
Authority with respect thereto; and
(b) within ten (10) Business Days after the Borrower receives
written notice from the Lender requesting the same, copies of any
Employee Benefit Plan and related documents, reports and correspondence
specified in such notice.
For purposes of this SECTION 6.07, the Borrower shall be deemed to know all
facts known by the Administrator of any Employee Benefit Plan of which the
Borrower is the plan sponsor.
6.08. ENVIRONMENTAL NOTICES. The Borrower shall deliver all
notices pertaining to Environmental Laws, Environmental Hazards, Remedial
Actions and Environmental Encumbrances as are required to be delivered under
the terms of the Fixed and Floating Charge.
6.09. LABOR MATTERS. The Borrower shall notify the Lender in
writing, promptly upon the Borrower's learning thereof, of (a) any material
labor dispute to which the Borrower or any Parent may become a party,
including, without limitation, any strikes, lockouts or other disputes
relating to such Persons' plants and other facilities and (b) any liability
incurred with respect to the closing of any plant or other facility of the
Borrower or any Parent.
6.10. GOVERNMENT CONTRACT NOTICES. The Borrower shall notify the
Lender in writing, within three (3) Business Days after the Borrower's learning
thereof, of any of the following:
(a) Any Governmental Authority, any prime contractor, subcontractor
or other Person has notified the Borrower that the Borrower has breached
or violated in any material
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respect any Requirement of Law, certification, representation, clause,
provision or requirement pertaining to any Government Contract;
(b) A termination for default, termination for convenience, cure
notice or show cause notice is in effect with respect to any Government
Contract;
(c) Any cost incurred pertaining to any Government Contract has been
questioned or challenged, is the subject of any investigation or has been
disallowed by any Governmental Authority;
(d) Any money due to the Borrower or any Parent pertaining to
any Government Contact is withheld, or is the subject of an attempt to
withhold, or is reduced through exercise of a right of set-off or
otherwise;
(e) The commencement or threat of any action, suit, investigation or
proceeding relating to any Government Contact, or relating to any proposed
suspension or debarment of the Borrower, or any of its employees or agents,
against the Borrower, such other Person or any Property;
(f) The discovery of any irregularity, misstatement or omission
arising under or relating to any Government Contract that could reasonably
be expected to lead to (i) an administrative, civil or criminal
investigation, indictment or information with respect to the Borrower or
any of its directors, officers, employees, consultants or agents,
(ii) disclosure of such irregularity, misstatement or omission to
any Governmental Authority or (iii) material damage, penalty assessment,
recoupment of payment or disallowance of cost; or
(g) The existence of (i) any outstanding material Claims against the
Borrower or any Property, either by a Governmental Authority or by any prime
contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract, or (ii) any material dispute between
the Borrower or any Parent, on the one hand, and any Governmental Authority,
any prime contractor, subcontractor, vendor or other third party, on the
other hand, arising under or relating to any Government Contract.
6.10. OTHER INFORMATION. Promptly upon receiving a request therefor
from the Lender, the Borrower shall prepare and deliver to the Lender such other
information with respect to the Borrower, any Parent, or the Collateral,
including, without limitation, schedules identifying and describing
the Collateral and any dispositions thereof, as from time to time may be
reasonably requested by the Lender.
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ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants or represents and agrees that so long as any
Obligations are outstanding (other than indemnities not yet due), unless the
Lender shall otherwise give prior written consent:
7.01. ORGANIZATIONAL EXISTENCE, ETC. Except as permitted by
SECTION 8.09, the Borrower shall and each Parent shall at all times maintain
its organizational existence and preserve and keep, or cause to be preserved
and kept, in full force and effect its rights and franchises material to its
businesses, except where the loss or termination of such rights and
franchises is not likely to have a Material Adverse Effect.
7.02. ORGANIZATIONAL POWERS; CONDUCT OF BUSINESS. The Borrower and
each Parent shall to qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so
qualified.
7.03. COMPLIANCE WITH LAWS, ETC. The Borrower and each Parent
shall (a) comply with all Requirements of Law and all restrictive covenants
affecting such Person or the business, Property, assets or operations of such
Person, and (b) obtain as needed all Permits necessary for its operations and
maintain such Permits in good standing, except in the case where
noncompliance with either CLAUSE (a) or (b) above is not reasonably likely to
have a Material Adverse Effect.
7.04. PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Borrower
and each Parent shall pay (a) all taxes, assessments and other governmental
charges imposed upon it or on any of its Property or assets or in respect of
any of its franchises, business, income or Property before any penalty,
addition to tax or interest accrues thereon, and (b) all claims (including,
without limitation, claims for labor, services, materials and supplies) for
sums which have become due and payable and which by law have or may become a
Lien (other than a Lien permitted by SECTION 8.03) upon any of the Borrower's
or any Parent's Property or assets, prior to the time when any penalty or
fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that no such
taxes, assessments and governmental charges referred to in CLAUSE (a) above
or claims referred to in CLAUSE (b) above need be paid if being contested in
good faith by appropriate proceedings diligently instituted and conducted and
if such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor. Neither Borrower nor
Parent will file or consent to the filing of any consolidated income tax
return with any Person (other than with KHI, KTI, the Parents, the Borrower
or any of their respective Subsidiaries).
7.05. INSURANCE. The Borrower shall maintain in full force and
effect the insurance policies and programs applicable
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to Borrower listed on SCHEDULE 5.01-X of the KTI Credit Agreement or
substantially similar policies and programs or other policies and programs as
are acceptable to the Lender and, upon the request of the Lender, such other
insurance which, in the sole and reasonable judgment of the Lender, is
necessary or desirable to increase the likelihood of the repayment of the
Obligations. All such policies and programs shall be maintained with
insurers acceptable to the Lender. Each certificate and policy relating to
Property damage, boiler and machinery and/or business interruption coverage
shall contain an endorsement, in form and substance acceptable to the Lender,
showing loss payable to the Lender, and, if required by the Lender, naming the
Lender as an additional insured under such policy. Each certificate and
policy relating to coverages other than the foregoing shall, if required by
the Lender, contain an endorsement naming the Lender as an additional insured
under such policy. Such endorsement or an independent instrument furnished
to the Lender shall provide that the insurance companies will give the Lender
at least thirty (30) days' written notice before any such policy or policies
of insurance shall be altered adversely to the interests of the Lender or
cancelled and that no act, whether willful or negligent, or default of the
Borrower or any other Person shall affect the right of the Lender to recover
under such policy or policies of insurance in case of loss or damage. In the
event the Borrower or any Parent, at any time or times hereafter shall fail
to obtain or maintain any of the policies or insurance required herein or to
pay any premium in whole or in part relating thereto, then the Lender,
without waiving or releasing any obligations or resulting Event of Default
hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto which the Lender
deems advisable. All sums so disbursed by the Lender shall be part of the
Obligations, payable as provided in this Agreement.
7.06. INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The
Borrower and each Parent shall permit any authorized representative(s)
designated by the Lender to visit and inspect any of the Properties of the
Borrower or any Parent, to examine, audit, check and make copies of their
respective financial and accounting records, books, journals, orders, receipts
and any correspondence and other data relating to their respective businesses
or the transactions contemplated hereby or by the Recoil Acquisition Documents
(including, without limitation, in connection with environmental compliance,
hazard or liability or any Government Contract), and to discuss their
affairs, finances and accounts with their officers and independent certified
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours, as often as may be reasonably requested. At
the request of the Lender and upon delivery to the Borrower of invoices
therefor, each such visitation and inspection shall be at the Borrower's
expense. The Borrower and each Parent shall keep and maintain in
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all material respects proper books of record and account in which entries in
conformity with GAAP shall be made of all dealings and transactions in
relation to their respective businesses and activities, including, without
limitation, transactions and other dealings with respect to the Collateral.
If an Event of Default has occurred and is continuing, the Borrower and each
Parent, upon the Lender's request, shall turn over copies of any such records
to the Lender or its representatives.
7.07. INSURANCE AND CONDEMNATION PROCEEDS. The Borrower hereby
directs all insurers under policies of Property damage, boiler and machinery
and business interruption insurance and payors of any condemnation claim or
award relating to the Property to pay all proceeds payable under such
policies or with respect to such claim or award directly to the Lender, and
in no case to the Borrower and the Lender. Such proceeds shall constitute
Net Cash Proceeds of Sale and shall be applied to the Obligations in
accordance with SECTION 3.01(b)(vi).
7.08. [Intentionally omitted].
7.09. EMPLOYEE BENEFIT PLAN COMPLIANCE. The Borrower shall
establish, maintain and operate all Employee Benefit Plans to comply in all
material respects with all laws and regulations applicable thereto and the
respective requirements of the governing documents for such Employee Benefit
Plans.
7.10. GOVERNMENT CONTRACT COMPLIANCE. The Borrower shall (a)
maintain all Permits pertaining to Government Contracts required to operate
the Borrower's business as it is currently conducted, including, without
limitation, all Export Licenses and other similar Permits; and (b) comply in
all material respects with all Requirements of Law and Contractual Obligations
pertaining to each Government Contract.
7.11. MAINTENANCE OF PROPERTY. The Borrower and each Parent shall
maintain in all material respects all of their respective owned and leased
Property in good, safe and insurable condition and repair, and not permit,
commit or suffer any waste or abandonment of any such Property and from time
to time shall make or cause to be made all material repairs, renewal and
replacements thereof, including, without limitation, any capital improvements
which may be required; PROVIDED, HOWEVER, that such Property may be altered or
renovated in the ordinary course of business.
7.12. CONDEMNATION. Immediately upon learning of the institution
of any proceeding for the condemnation or other taking of any of the owned or
leased Real Property of the Borrower or any Parent, the Borrower shall notify
the Lender of the pendency of such proceeding, and permit the Lender to
participate in any such proceeding, and from time to time will deliver to the
Lender all instruments reasonably requested by the Lender to permit such
participation.
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7.13. BUSINESS CONTRACTS. Within 120 days after the Effective Date,
the Borrower shall deliver to Lender evidence that (i) all parties to any
"Business Contract" (under and as defined in the Recoil Australia Acquisition
Agreement) transferred to and/or assumed by the Borrower in connection with
the Recoil Acquisition have consented to such transfer and/or assumption,
(ii) that such consent was not required under such Business Contract or
applicable Requirements of Law, (iii) that such Business Contract has been
replaced by a new Business Contract with such party or (iv) that such
Business Contract is not material to Borrower's business.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants or represents and agrees that so long as any
Obligations are outstanding (other than indemnities not yet due), unless the
Lender shall otherwise give prior written consent:
8.01. INDEBTEDNESS. Neither the Borrower nor any Parent shall
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations and other obligations and liabilities under the
Loan Documents;
(ii) trade payables, wages and other accrued expenses incurred
in the ordinary course of business;
(iii) the Transaction Costs;
(iv) to the extent permitted by ARTICLE IX and the KTI Credit
Agreement and in any event in an aggregate amount not to exceed
$3,000,000 at any time, Capital Leases and purchase money
Indebtedness incurred to finance the acquisition of fixed assets,
and Indebtedness incurred to refinance such Capital Leases and
purchase money Indebtedness;
(v) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent
that payment thereof is not required pursuant to SECTION 7.04;
(vi) Indebtedness constituting Accommodation Obligations
permitted by SECTION 8.05;
(vii) Indebtedness with respect to reasonable warranties and
indemnities made under any agreements for asset sales permitted under
SECTION 8.02;
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(viii) Indebtedness with respect to warranties and indemnities in
favor of Recoil Australia and the Vendors under the Recoil Australia
Acquisition Agreement; and
(ix) Permitted Existing Indebtedness
8.02. SALES OF ASSETS. Neither the Borrower nor any Parent shall
sell, assign, transfer, lease, convey or otherwise dispose of any Property,
whether now owned or hereafter acquired, or any income or profits therefrom,
or enter into any agreement to do so, except:
(i) the sale of Property having an aggregate Fair Market Value
of not more than $1,000,000 in any Fiscal Year for cash consideration
not less than the Fair Market Value thereof, PROVIDED that the
Borrower complies with the mandatory prepayment provisions set forth
in SECTION 3.01(b);
(ii) the transfer of Property from the Borrower or any Parent to
KTI;
(iii) the sale of Inventory in the ordinary course of business;
(iv) the disposition of Equipment if (A) such Equipment is obsolete
or no longer useful in the ordinary course of the Borrower's or such
Parent's business, PROVIDED, that the aggregate Fair Market Value of all
such Equipment disposed of in any Fiscal Year shall not exceed $500,000,
or (B) within six (6) months after such disposition, the proceeds
therefrom are either (I) used to finance the purchase of replacement
Equipment and the Borrower delivers to the Lender evidence of such use
and that the replacement Equipment is free and clear of all Liens except
those created under the Loan Documents or (II) delivered to the Lender
for application to the repayment of the Obligations;
(v) the licensing of General Intangibles as permitted by the Loan
Documents; and
(vi) any Investment permitted under SECTION 8.04.
8.03. LIENS. Neither the Borrower nor any Parent shall directly or
indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of their respective Property or assets except:
(i) Liens created by the Loan Documents;
(ii) Customary Permitted Liens;
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(iii) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of the Borrower's or any Parent's purchase thereof) securing
an amount not to exceed $3,000,000 in the aggregate at any time or
from time to time, PROVIDED, that such Liens shall not apply to any
Property of the Borrower or any Parent other than that purchased
or subject to such Capital Lease; and
(iv) Permitted Existing Liens.
8.04. INVESTMENTS. Neither the Borrower nor any Parent
shall directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iii) contributions to and payments of benefits under any Employee
Benefit Plan (in accordance with the terms of the Employee Benefit Plan)
permitted by this Agreement; and
(iv) Investments arising from intercompany loans from the Borrower
or any Parent to KTI, PROVIDED, that all such Indebtedness shall be
evidenced by promissory notes delivered to the Lender in accordance with
the Fixed and Floating Charge or the Parent Pledge Agreements and shall be
subordinated in right of payment ot the "Obligations" under (and as
defined in) the KTI Credit Agreement;
8.05. ACCOMMODATION OBLIGATIONS. Neither the Borrower nor any
Parent shall directly or indirectly create or become or be liable with
respect to any Accommodation Obligation, except:
(i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of
business;
(ii) Permitted Existing Accommodation Obligations; and
(iii) Accommodation Obligations arising under the Loan Documents.
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8.06. RESTRICTED JUNIOR PAYMENTS. Neither the Borrower nor any
Parent shall declare or make any Restricted Junior Payment, except that each
Parent may make dividends or distributions to KTI on the Capital Stock of
such Parent.
8.07. CONDUCT OF BUSINESS. The Borrower shall not engage in any
business other than (i) the businesses engaged in by Recoil Australia on the
Effective Date and (ii) any business or activities which are substantially
similar, related or incidental thereto, all of which shall be conducted
outside the United States of America. The Parents shall not engage in any
business other than the holding of the Capital Stock of RCL.
8.08. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the
Borrower nor any Parent shall directly or indirectly enter into or permit to
exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder or holders of more than five percent (5%) of any class of equity
Securities of KTI or KHI, or with any Affiliate of the Borrower, on terms
that are less favorable to the Borrower than those that might be obtained in
an arm's length transaction at the time from Persons who are not such a
holder or Affiliate. Nothing contained in this SECTION 8.08 shall prohibit
(i) any transaction expressly permitted by SECTIONS 8.01 or 8.05; (ii)
increases in compensation and benefits for officers and employees of the
Borrower which are customary in the industry or consistent with the past
business practice of the Borrower or any Parent, PROVIDED, that no Event of
Default or Potential Event of Default has occurred and is continuing; (iii)
payment of customary directors' fees and indemnities; (iv) performance of any
obligations arising under the Transaction Documents; or (v) transactions
between the Borrower or any Parent and KTI, PROVIDED that no Event of
Default or Potential Event of Default results therefrom.
8.09. RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Borrower nor
any Parent shall enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series
of transactions, all or substantially all of the Borrower's or any such
Parent's business or Property, whether now or hereafter acquired, except
for (i) transactions permitted under SECTION 8.02 and (ii) a merger
of Recoil Holdings and Recoil Australia Holdings, PROVIDED that such merger
will not result in any adverse tax consequences to Recoil Holdings, Recoil
Australia Holdings, the Borrower or the Lender.
8.10. SALES AND LEASEBACKS. Neither the Borrower nor any Parent
shall become liable, directly, by assumption or by Accommodation Obligation,
with respect to any lease, whether an Operating Lease or a Capital Lease, of
any Property (whether real or personal or mixed) (i) which it sold or
transferred or is to sell or transfer to any other Person, or (ii) which it
intends to
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use for substantially the same purposes as any other Property which has been
or is to be sold or transferred by it to any other Person in connection with
such lease.
8.11. EMPLOYEE BENEFIT PLAN MATTERS. The Borrower shall not:
(i) permit any unfunded liabilities with respect to any Pension
Plan; or
(ii) fail to pay any required contributions or payments to a Pension
Plan on or before the due date for such required installment or payment.
8.12. ISSUANCE OF CAPITAL STOCK. The Borrower shall not issue any
Capital Stock to any Person except for the Capital Stock isued by the
Borrower to Recoil Holdings and Recoil Australia Holdings as of the Effective
Date. Each Parent shall not issue any Capital Stock to any Person except for
the Capital Stock issued by such Parent to KTI as of the Effective Date.
8.13. ORGANIZATIONAL DOCUMENTS. Neither the Borrower nor any
Parent shall amend, modify or otherwise change any of the terms or provisions
in any of their respective Organizational Documents as in effect on the date
hereof, PROVIDED, that the Borrower shall be permitted to change its name to
Recoil Pty Ltd after the Effective Date.
8.14. BANK ACCOUNTS. Neither the Borrower nor any Parent shall
open or maintain any deposit account with any Person unless (i) such Person
is a bank or financial institution reasonably acceptable to the Lender, (ii)
such Person has executed a Collection Account Agreement with respect to such
deposit account, and (iii) SCHEDULE 1.01.1 reflects (or shall have been
amended to reflect) such Person as a Collection Account Bank and such deposit
account as a Collection Account under this Agreement.
8.15. FISCAL YEAR. Neither the Borrower nor any Parent shall
change its Fiscal Year for accounting or tax purposes from a period
consisting of the 12-month period ending on December 31 of each calendar year.
8.16. SUBSIDIARIES. The Borrower shall not acquire or create any
Subsidiaries. Neither Parent shall acquire or create any Subsidiaries other
than the Borrower.
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ARTICLE IX
FINANCIAL COVENANTS
The Borrower covenants and agrees that so long as any Obligations
are outstanding (other than indemnities not yet due), unless the Lender shall
otherwise give prior written consent thereto:
9.01 NET INCOME. The Borrower shall have positive net income,
determined in conformity with GAAP on a first-in-first-out method of
inventory accounting basis, for each 12-month period ending on each March 31,
June 30, September 30 and December 31 during the term of this Agreement;
PROVIDED, HOWEVER, that for the periods ending on September 30, 1996,
December 31, 1996, March 31, 1997 and June 30, 1997, such periods shall
commence on the Effective Date.
ARTICLE X
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.01. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Borrower shall fail to
pay when due any of the Obligations (other than the failure to make a
payment under SECTION 3.03 with respect to Taxes payable to a federal
Australian Governmental Authority).
(b) BREACH OF CERTAIN COVENANTS. The Borrower or any Parent shall
fail duly and punctually to perform or observe any agreement, covenant or
obligation binding on such Person under SECTIONS 6.08, 7.01, and 7.06,
ARTICLE VIII or ARTICLE IX.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Borrower or any Parent to the Lender
herein or by the Borrower or any Parent in any of the other Loan Documents or
in any statement or certificate at any time given by any such Person pursuant
to any of the Loan Documents shall be false or misleading in any material
respect on the date as of which made (or deemed made).
(d) OTHER DEFAULTS. The Borrower or any Parent shall default in
the performance of or compliance with any term contained in this Agreement
(other than as covered by PARAGRAPHS (a), (b) or (c) of this SECTION 10.01)
or any default or event of default shall occur under any of the other Loan
Documents, and such default or event of default shall continue for fifteen
(15) days after the Borrower has knowledge of the default or, if earlier,
receipt by the Borrower of a notice of the default from the Lender (other
than the failure to make a payment under SECTION 3.03 with respect to Taxes
payable to a federal Australian Governmental Authority).
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(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES; KHI
AGREEMENTS. The Borrower or any Parent shall fail to make any payment when
due (whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise) with respect to any Indebtedness (other than an Obligation)
having a principal amount in excess of $100,000; or any breach, default or
event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any such Indebtedness; or
any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the Borrower or any Parent (other than by a regularly
scheduled required prepayment) prior to the stated maturity thereof; or any
"Event of Default" under (and as defined in) either of the KHI Agreements or
the KTI Credit Agreement has occurred and is continuing.
(f) INSOLVENCY EVENTS.
(i) An involuntary case shall be commenced against the Borrower or
any Parent and the petition shall not be dismissed, stayed, bonded or
discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief
in respect of the Borrower or any Parent in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law; or the board of directors of the
Borrower or any Parent Subsidiaries (or any committee thereof) adopts any
resolution or otherwise authorizes any action to approve any of the foregoing.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian, controller (as defined in the Corporations Law) or other
officer having similar powers over the Borrower or any of its Subsidiaries or
over all or a substantial part of the Property of the Borrower or any Parent
shall be entered; or a Person is appointed under legislation to investiate or
manage any part of the affairs of the Borrower or any Parent; or an interim
receiver, trustee or other custodian of the Borrower or any Parent or of all
or a substnatial part of the Property of the Borrower or any Parent shall be
appointed or a warrant of attachment, execution or similar process against
any substantial part of the Property of the Borrower or any Parent shall be
issued an any such event shall not be stayed, dismissed, bonded or discharged
within sixty (60) days after entry, appointment or issuance; or the board of
directors of the Borrower or any Parent (or any committee thereof) adopts any
resolution or otherwise authorizes any action to approve any of the foregoing.
(iii) The Borrower or any Parent shall commence a voluntary case
under any applicable bankruptcy, insolvency or
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other similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee, controller or
other custodian for all or a substantial part of its Property, or shall
consent to the appointment under legislation of a Person to investigate or
manage any part of the affairs of the Borrower or any Parent; or the Borrower
or any of its Subsidiaries of the Borrower shall make any assignment for the
benefit of creditors or shall be unable or fail, or admit in writing its
inability, to pay its debts as such debts become due.
(iv) Any Insolvency Event shall have occurred.
(g) JUDGMENTS AND ATTACHMENTS. Any money judgment (other than a
money judgment covered by insurance as to which the insurance company has
acknowledged coverage), distress, writ, warrant of attachment or order of
encumbrance, or similar process against the Borrower or any Parent of the
Borrower or any of their respective assets involving in any case an amount in
excess of $500,000 is entered or levied and shall remain undischarged,
unvacated, unbonded or unstayed for a period of sixty (60) days or in any
event later than five (5) days prior to the date of any proposed sale
thereunder.
(h) DISSOLUTION. Any order, judgment or decree shall be entered
against the Borrower or any Parent decreeing its involuntary dissolution or
split up and such order shall remain undischarged and unstayed for a period
in excess of sixty (60) days; or the Borrower or any Parent shall otherwise
dissolve or cease to exist except as specifically permitted by this Agreement.
(i) LOAN DOCUMENTS; FAILURE OF SECURITY. At any time, for any
reason, (i) any Loan Document ceases to be in full force and effect or the
Borrower or any Parent party thereto seeks to repudiate its obligations
thereunder and the Liens intended to be created thereby are, or the Borrower
or any Parent seeks to render such Liens, invalid and unperfected, or (ii)
Liens in favor of the Lender contemplated by the Loan Documents shall, at any
time, for any reason, be invalidated or otherwise cease to be in full force
and effect, or such Liens shall be subordinated or shall not have the
priority contemplated by this Agreement or the Loan Documents.
(j) TERMINATION EVENT. Any Termination Event occurs which the
Lender believes could reasonably be expected to subject the Borrower to
liability in excess of $250,000.
(k) SUSPENSIONS, DEBARMENT. Any suspension or debarment with
respect to Government Contracts is imposed on the Borrower or any of its
directors, officers, employees, consultants or agents.
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(l) MATERIAL ADVERSE CHANGE. An event shall exist which has a
Material Adverse Effect.
(m) REDUCTION IN CAPITAL. The Borrower or any Parent takes action
to reduce its capital.
(n) CESSATION OF BUSINESS. The Borrower or any Parent ceases to
carry on its business or a material part of it, or threatens to do either of
those things except to reconstruct or amalgamate while solvent on terms
approved by the Lender.
(o) CHANGE OF CONTROL. All of the Capital Stock of the Borrower
ceases to be held by Recoil Holdings and/or Recoil Australia Holdings.
(p) TAX PAYMENTS. The Company or any Parent does not pay when due
(i) any money payable by such Person under SECTION 3.03 or under Section 5 of
the Guaranty, as applicable or (ii) any money such Person has warranted it
will pay under SECTION 3.03 or under Section 5 of the Guaranty.
An event of Default shall be deemed "continuing" until cured or
waived in writing in accordance with SECTION 11.05.
10.02. RIGHTS AND REMEDIES.
(a) ACCELERATION AND TERMINATION. Upon the occurrence of any Event
of Default described in SECTIONS 10.01(f), the Term Loan Commitment shall
automatically and immediately terminate and the unpaid principal amount of,
and any and all accrued interest on, the Obligations and all accrued fees
shall automatically become immediately due and payable, without presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of
intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by the Borrower; and upon the occurrence and during the
continuance of any other Event of Default, the Lender may, by written notice
to the Borrower, declare the unpaid principal amount of and any and all
accrued and unpaid interest on the Obligations to be, and the same shall
thereupon be, immediately due and payable, without presentment, demand, or
protest or other requirements of any kind (including, without limitation,
valuation and appraisement, diligence, presentment, notice of intent to
demand or accelerate and of acceleration), all of which are hereby expressly
waived by the Borrower.
(b) DEFAULT RATE OF INTEREST. In addition to any other remedies
available to the Lender after the occurrence of an Event of Default, the
Lender shall be entitled to receive interest on the Obligations at the
default rate in accordance with SECTION 2.02(c).
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(c) ENFORCEMENT. The Borrower acknowledges that in the event the
Borrower or any of its Subsidiaries fails to perform, observe or discharge
any of their respective obligations or liabilities under this Agreement or
any other Loan Document, any remedy of law may prove to be inadequate relief
to the Lender; therefore, the Borrower agrees that the Lender shall be
entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
ARTICLE XI
MISCELLANEOUS
11.01. EXPENSES. The Borrower agrees upon demand to pay, or
reimburse the Lender for, all of the Lender's reasonable internal and
external audit, legal, appraisal, valuation, filing, document duplication and
reproduction and investigation expenses and for all other out-of-pocket costs
and expenses of every type and nature (including, without limitation, the
reasonable fees, expenses and disbursements of Sidley & Austin, local and
foreign legal counsel, auditors, accountants, appraisers, printers, insurance
and environmental advisers, and other consultants and agents) incurred by the
Lender in connection with (a) the preparation, negotiation, execution,
stamping, registration and completion of this Agreement and the Loan
Documents and any amendments, consents, waivers, assignments, restatements,
or supplements to any of the same; (b) the Lender's periodic audits of the
Borrower and the parents after the Effective Date; (c) the protection of the
Liens under the Loan Documents after the Effective Date (including, without
limitation, any reasonable fees and expenses for local counsel in various
jurisdictions); (d) the ongoing administration of this Agreement and the Term
Loan, including consultation with attorneys in connection therewith and with
respect to the Lender's rights and responsibilities under this Agreement and
the other Loan Documents; (e) the protection, collection or enforcement of
any of the Obligations or Loan Documents or any security therefor or
exercising or enforcing any other right or remedy available to the Lender
under the Loan Documents; (f) the commencement, defense or intervention in
any court proceeding relating in any way to the Obligations, the Property,
the Borrower, any Parent, this Agreement or any of the other Transaction
Documents; (g) the response to, and preparation for, any subpoena or request
for document production with which the Lender is served or deposition or
other proceeding in which the Lender is called to testify, in each case,
relating in any way to the Obligations, the Property, the Borrower, Parent,
this Agreement or any of the other Transaction Documents; (h) in connection
with any refinancing or restructuring of the credit arrangements provided
under this Agreement in the nature of a "work-out" or in any insolvency or
bankruptcy proceeding; (i) in taking any other action in or with respect to
any suit or proceeding (bankruptcy or otherwise) described in CLAUSES (e)
through (h) above.
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11.02. INDEMNITY. The Borrower further agrees to defend, protect,
indemnify, and hold harmless the Lender and each of its officers, directors,
employees, attorneys and agents (including, without limitation, those
retained in connection with the satisfaction or attempted satisfaction of any
of the conditions set forth in ARTICLE IV) (collectively, the "Indemnitees")
from and against any and all liabilities, obligations, losses (other than
loss of profits), damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (excluding
any taxes and including, without limitation, the fees and disbursements of
counsel or consulting firms for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitees shall be designated a party thereto), imposed on, incurred by, or
asserted against such Indemnitees in any manner relating to or arising out of
(a) this Agreement or the other Loan Documents, or any act, event or
transaction related or attendant thereto or to the Recoil Acquisition, the
making of the Term Loan, the management of the Term Loan, the use or intended
use of the proceeds of the Term Loan hereunder, or any of the other
transactions contemplated by the Transaction Documents, or (b) any
Liabilities and Costs under Environmental Laws arising from or in connection
with the past, present or future operations of the Borrower, any Parent or
any of their respective predecessors in interest, or, the past, present or
future environmental condition of any Property, the presence of
asbestos-containing materials at any Property or the Release or threatened
Release of any Contaminant (collectively, the "Indemnified Matters");
PROVIDED, HOWEVER, that the Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Matters to the extent caused
by or resulting from the willful misconduct or gross negligence of the
Indemnitee (or any other Indemnitee whose willful misconduct or grossly
negligent acts were authorized by the Indemnitee claiming indemnification
hereunder), as determined by a court of competent jurisdiction. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall contribute the maximum portion which
it is permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees.
11.03. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the
accounting principles used in the preparation of the most recent financial
statements referred to in SECTION 6.01 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Borrower with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
covenants, standards or terms found in ARTICLE VIII and ARTICLE IX, the parties
hereto
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agree to enter into negotiations in order to amend such provisions so as to
equitably reflect such changes with the desired result that the criteria for
evaluating compliance with such covenants, standards and terms by the
Borrower shall be the same after such changes as if such changes had not been
made; PROVIDED, HOWEVER, that no change in GAAP that would affect the method
of calculation of any of the covenants, standards or terms shall be given
effect in such calculations until such provisions are amended, in a manner
satisfactory to the Lender and the Borrower, to so reflect such change in
accounting principles.
11.04. SETOFF. In addition to any Liens granted under the Loan
Documents and any rights now or hereafter granted under applicable law, upon
the occurrence and during the continuance of any Event of Default, the Lender
is hereby authorized by the Borrower at any time or from time to time,
without notice to any Person (any such notice being hereby expressly waived)
to set off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured (but not including
trust accounts)) and any other Indebtedness at any time held or owing by the
Lender to or for the credit or the account of the Borrower against and on
account of the Obligations of the Borrower to the Lender, including, but not
limited to, the Term Loan and all claims of any nature or description
arising out of or in connection with this Agreement, irrespective of whether
or not (a) the Lender shall have made any demand hereunder or (b) the Lender
shall have declared the principal of and interest on the Term Loan and other
amounts due hereunder to be due and payable as permitted by ARTICLE X and
even though such Obligations may be contingent or unmatured.
11.05. AMENDMENTS AND WAIVERS. Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement
shall be effective without the written agreement of the Lender and the
Borrower, and no termination or waiver of any provision of this Agreement, or
consent to any departure by the Borrower therefrom, shall be effective
without the written concurrence of the Lender, which the Lender shall have
the right to grant or withhold in its sole discretion. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
11.06. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telecopied, telexed or sent by
courier service or United States certified mail and shall be deemed to have
been given when delivered in person or by courier service, upon receipt of a
telecopy or telex or three (3) days (seven (7), if posted to Australia from a
place outside of Australia or from
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Australia to place outside of Australia) Business Days after deposit in the
ordinary post in the applicable jurisdiction with postage prepaid and properly
addressed. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in this SECTION
11.06) shall be as follows:
(a) If to the Lender, at:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Murry Stegelmann
Telecopier No. (203) 316-7894
with copies to:
General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Corporate Finance Group
Department Counsel
Telecopier No. (203) 316-7889
and
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: Edward D. Eddy, III, Esq.
Telecopier No. (213) 896-6600
(b) If to the Borrower, at:
RCL Pty
c/o Kaynar Technologies Inc.
800 South State College Blvd.
Fullerton, California 92634-3001
Attention: David A. Werner
Telecopier No. (714) 680-3153
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attn: C. James Levin, Esq.
Telecopier No. (213) 669-6407
PROVIDED, that the Lender or the Borrower shall have the right to change any
of the above-listed addresses by properly addressed and delivered notice to
the other party.
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11.07. SURVIVAL OF WARRANTIES AND AGREEMENTS. All representations
and warranties made herein and all obligations of the Borrower in respect of
taxes, indemnification and expense reimbursement shall survive the execution
and delivery of this Agreement and the other Loan Documents, the making and
repayment of the Term Loan, and the termination of this Agreement and shall
not be limited in any way by the passage of time or occurrence of any event
and shall expressly cover time periods when the Lender may have come into
possession or control of any of the Borrower's or any Parent's Property.
11.08. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of the Lender in the exercise of any power,
right or privilege under any of the Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing under
the Loan Documents are cumulative to and not exclusive of any rights or
remedies otherwise available.
11.09. MARSHALLING; PAYMENTS SET ASIDE. The Lender shall be under
no obligation to marshall any assets in favor of the Borrower or any other
party or against or in payment of any or all of the Obligations. To the
extent that the Borrower makes a payment or payments to the Lender or the
Lender receives payment from the proceeds of the Collateral or exercises its
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, right and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
11.10. SEVERABILITY. In case any provision in or obligation under
this Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
11.11. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement or be given any substantive effect.
11.12. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
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11.13. LIMITATION OF LIABILITY. No claim may be made by the
Borrower or the Lender or any other Person against the Borrower, the Lender
or the Affiliates, directors, officers, employees, attorneys or agents of any
of them for any special, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of
or related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and the Borrower and the
Lender hereby waive, release and agree not to sue upon any such claim for any
such damages, whether or not accrued and whether or not known or suspected to
exist in its favor.
11.14. SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto
and the successors and permitted assigns of the Lender. The Lender may
assign all or any part of its rights and obligations under this Agreement and
the other Loan Documents to any Person upon thirty (30) days' prior written
notice to (but without the consent of) the Borrower, it being agreed and
understood that the Lender's right to assign its interests under this
Agreement and the other Loan Documents shall be independent of any right of
assignment in favor of the Lender with respect to any other agreement,
document or instrument to which it is a party. The rights hereunder of the
Borrower, or any interest therein, may not be assigned without the written
consent of the Lender.
11.15. CERTAIN CONSENTS AND WAIVERS OF THE BORROWER.
(a) PERSONAL JURISDICTION. (i) THE LENDER AND THE BORROWER
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF ANY CALIFORNIA STATE COURT OR FEDERAL COURT
SITTING IN LOS ANGELES, CALIFORNIA, AND ANY COURT HAVING JURISDICTION OVER
APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE EXTENT PERMITTED BY LAW,
IN SUCH FEDERAL COURT. THE BORROWER IRREVOCABLY DESIGNATES AND APPOINTS CT
CORPORATION AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PROCESS IN
ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. THE LENDER AND THE
BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE BORROWER WAIVES IN ALL
DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
CONSIDERING THE DISPUTE.
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(ii) THE BORROWER AGREES THAT THE LENDER SHALL HAVE THE RIGHT TO
PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION WHICH
IS NECESSARY OR DESIRABLE TO ENABLE THE LENDER TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE LENDER. THE BORROWER AGREES THAT IT WILL
NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE
LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
LENDER. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT IN WHICH THE LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS
SECTION.
(b) SERVICE OF PROCESS. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS
SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH
MAILING. THE BORROWER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(D) IMMUNITY. NEITHER THE COMPANY NOR ANY PARENT HAVE IMMUNITY FROM
THE JURISDICTION OF ANY COURT OR FROM LEGAL PROCESS (WHETHER THROUGH SERVICE
OF PROCESS, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION,
EXECUTION OR OTHERWISE).
11.16. COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This
Agreement and any amendments, waivers, consents, or supplements hereto may be
executed in counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. This Agreement shall become effective
against the Borrower and the Lender as of the date when all of the conditions
set forth in SECTION 4.01 have been satisfied or duly waived in accordance
with SECTION 11.05 (the "Effective Date"). Subject to the provisions of this
Agreement (including, without limitation, the preliminary statements hereto),
this Agreement and each of the other Loan Documents shall be construed to the
extent reasonable to be consistent one with the other, but to the extent that
the terms and conditions of this Agreement are actually
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<PAGE>
inconsistent with the terms and conditions of any other Loan Document, this
Agreement shall govern.
11.17. CONFIDENTIALITY. The Lender shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement and
identified as such by the Borrower in accordance with the Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide offeree, transferee or
participant in connection with the contemplated transfer or participation or
as required or requested by any Governmental Authority or representative
thereof or pursuant to legal process and shall require any such offeree,
transferee or participant to agree (and require any of its offerees,
transferees or participants to agree) to comply with this SECTION 11.17. In
no event shall the Lender be obligated or required to return any materials
furnished by the Borrower; PROVIDED, HOWEVER, that each offeree shall be
required to agree that if it does not become a transferee or participant it
shall return all materials furnished to it by the Borrower in connection with
this Agreement. Any and all confidentiality agreements entered into between
the Lender and the Borrower shall survive the execution of this Agreement.
11.18 SUPERVENING LEGISLATION. Any present or future legislation
which operates to vary the obligations of the Borrower or any Parent in
connection with the Agreement or the other Loan Documents with the result
that the Lender's rights, powers or remedies are adversely affected
(including by way of delay or postponement) is excluded except to the extent
that its exclusion is prohibited or rendered ineffective by applicable
Requirements of Law.
11.19 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement in respect of any Obligation of the Borrower to pay money.
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<PAGE>
11.20. ENTIRE AGREEMENT. This Agreement, taken together with all of
the other Loan Documents, embodies the entire agreement and understanding among
the parties hereto and all prior agreements and understandings, written and
oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
SIGNED by /s/ D.A. Werner
-------------------)
as authorized representative )
of RCL Pty in the presence of:)
) --------------------------
) By executing this Agreement
) the signatory warrants that
/s/ Jordon A. Law ) the signatory is duly
- ------------------------- ) authorized to execute this
Signature of Witness ) Agreement on behalf of RCL
Pty
SIGNED by /s/ Peter C. Keenoy
-------------------)
as authorized representative )
of General Electric Capital ) /s/ P.C. Keenoy
Corporation in the ) --------------------------
presence of: ) By executing this Agreement
) the signatory warrants that
/s/ illegible ) the signatory is duly
- ------------------------- ) authorized to execute this
Signature of Witness ) Agreement on behalf of
General Electric Capital
Corporation
<PAGE>
[EXECUTION COPY]
===============================================================================
PIK DIVIDEND NOTE AGREEMENT
Dated as of January 3, 1994
among
KAYNAR HOLDINGS INC.,
as Issuer
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Initial Holder
and
THE OTHER PERSONS
FROM TIME TO TIME PARTY HERETO,
as Holders
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
- ------- ----
<S> <C>
ARTICLE I
DEFINITIONS
1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Computation of Time Periods. . . . . . . . . . . . . . . . . . . . 18
1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.04. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE II
THE NOTES
2.01. Issuance of Notes. . . . . . . . . . . . . . . . . . . . . . . . . 18
2.02. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.03. Authorized Officers and Agents . . . . . . . . . . . . . . . . . . 22
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. Voluntary Prepayments. . . . . . . . . . . . . . . . . . . . . . . 22
3.02. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.03. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV
CONDITIONS TO ISSUANCE OF NOTES
4.01. Conditions Precedent to Effectiveness of this Agreement . . . . . 24
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. Closing Date Representations and Warranties. . . . . . . . . . . . 26
ARTICLE VI
REPORTING COVENANTS
6.01. Financial Statements and Reports . . . . . . . . . . . . . . . . . 29
6.02. Operations Reports . . . . . . . . . . . . . . . . . . . . . . . . 30
6.03. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04. Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.05. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ARTICLE VII
AFFIRMATIVE COVENANTS
<S> <C>
7.01. Corporate Existence, Etc.. . . . . . . . . . . . . . . . . . . . . 31
7.02. Corporate Powers; Conduct of Business. . . . . . . . . . . . . . . 31
7.03. Compliance with Laws, Etc. . . . . . . . . . . . . . . . . . . . . 32
7.04. Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . . 32
7.05. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.06. Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.07. ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.08. Foreign Employee Benefit Plan Compliance . . . . . . . . . . . . . 33
7.09. Government Contract Compliance . . . . . . . . . . . . . . . . . . 33
7.10. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . 33
7.11. Maintenance of Property. . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
NEGATIVE COVENANTS
8.01. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.02. Sales of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.03. Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.04. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.05. Accommodation Obligations. . . . . . . . . . . . . . . . . . . . . 37
8.06. Restricted Junior Payments . . . . . . . . . . . . . . . . . . . . 37
8.07. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 38
8.08. Transactions with Shareholders and Affiliates. . . . . . . . . . . 38
8.09. Restriction on Fundamental Changes . . . . . . . . . . . . . . . . 39
8.10. Sales and Leasebacks . . . . . . . . . . . . . . . . . . . . . . . 39
8.11. Issuance of Capital Stock. . . . . . . . . . . . . . . . . . . . . 39
8.12. Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . . 39
8.13. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.01. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . 39
9.02. Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X
MISCELLANEOUS
10.01. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.02. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.03. Change in Accounting Principles . . . . . . . . . . . . . . . . . 44
10.04. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.05. Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.06. Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
10.07. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.08. Survival of Warranties and Agreements . . . . . . . . . . . . . . 47
10.09. Failure or Indulgence Not Waiver; Remedies
Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.10. Marshalling; Payments Set Aside . . . . . . . . . . . . . . . . . 48
10.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.12. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.14. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . 48
10.15. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . 49
10.16. Certain Consents and Waivers of the Issuer. . . . . . . . . . . . 49
10.17. Counterparts; Inconsistencies . . . . . . . . . . . . . . . . . . 50
10.18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.19. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<PAGE>
EXHIBITS
--------
Exhibit A -- Form of Note
Exhibit B -- List of Closing Documents
SCHEDULES
---------
Schedule 1.01.1 -- Permitted Existing Accommodation
Obligations
Schedule 5.01-C -- Consents
Schedule 5.01-D -- Authorized, Issued and Outstanding Capital
Stock; Subsidiaries
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<PAGE>
PIK DIVIDEND NOTE AGREEMENT
This PIK Dividend Note Agreement dated as of January 3, 1994 (as
amended, supplemented or modified from time to time, the "Agreement") is entered
into by and among Kaynar Holdings Inc., a Delaware corporation (the "Issuer"),
General Electric Capital Corporation, a New York corporation (the "Initial
Holder") and the other Persons from time to time party hereto as "Holders" (as
defined below).
ARTICLE I
DEFINITIONS
1.01. CERTAIN DEFINED TERMS. The following terms used in this
Agreement shall have the following meanings, applicable both to the singular and
the plural forms of the terms defined:
"ACCOMMODATION OBLIGATION" means any Contractual Obligation,
contingent or otherwise, of one Person with respect to any Indebtedness,
obligation or liability of another, if the primary purpose or intent thereof by
the Person incurring the Accommodation Obligation is to provide assurance to the
obligee of such Indebtedness, obligation or liability of another that such
Indebtedness, obligation or liability will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders thereof
will be protected (in whole or in part) against loss in respect thereof
including, without limitation, direct and indirect guarantees, endorsements
(except for collection or deposit in the ordinary course of business), notes co-
made or discounted, recourse agreements, take-or-pay agreements, keep-well
agreements, agreements to purchase or repurchase such Indebtedness, obligation
or liability or any security therefor or to provide funds for the payment or
discharge thereof, agreements to maintain solvency, assets, level of income, or
other financial condition, and agreements to make payment other than for value
received. The amount of any Accommodation Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported; PROVIDED, that
(i) if the liability of the Person extending such guaranty or support is limited
with respect thereto to an amount less than the obligation guaranteed or
supported, or is limited to recourse against a particular asset or assets of
such Person, the amount of the corresponding Accommodation Obligation shall be
limited (in the case of a guaranty or other support limited by amount) to such
lesser amount or (in the case of a guaranty or other support limited by recourse
to a particular asset or assets) to the higher of the Fair Market Value of such
asset or assets at the date for determination of the amount of the Accommodation
Obligation or the value at which such asset or assets would, in conformity with
GAAP, be reflected on or valued for the purposes of preparing a consolidated
balance sheet of such Person as at such determination date; and (ii) if any
obligation is guaranteed or otherwise supported jointly and severally by a
Person and others, then the amount of the liability of such Person with respect
to
<PAGE>
such guaranty or other support to be included in the amount of such Person's
Accommodation Obligation shall be the whole principal amount so guaranteed or
otherwise supported.
"AFFILIATE" means any Person (other than the Initial Holder) which
directly or indirectly owns or controls, on an aggregate basis, including all
beneficial ownership and ownership or control as a trustee, guardian or other
fiduciary, at least ten percent (10%) of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors
(irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) of the Issuer or any Subsidiary of which is
controlled by or is under common control with the Issuer or any stockholders of
the Issuer, or any Subsidiary. For the purpose of this definition, "control"
means the possession, directly or indirectly, of the power to direct or to cause
the direction of management and policies, whether through the ownership of
voting securities, by contract or otherwise.
"AFS" means the Aerospace Fastening Systems Group of Microdot.
"AFS PURCHASE AGREEMENT" means the Asset Purchase Agreement dated as
of November 3, 1993 by and between Opco and Microdot, pursuant to which Microdot
agrees to sell, and Opco agrees to purchase substantially all of the assets of
AFS.
"AGREEMENT" is defined in the preamble hereto.
"BANKRUPTCY CODE" means Title 11 of the United States Code (11 U.S.C.
Sections 101 ET SEQ.), as amended from time to time, and any successor statute.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the
Central District of California, Santa Ana Division.
"BENEFIT PLAN" means a defined benefit plan as defined in
Section 3(35) of ERISA (other than a Multiemployer Plan) subject to Title IV
of ERISA (i) in respect of which the Issuer or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign
Employee Benefit Plan.
"BOARD OF DIRECTORS" means the board of directors of the Issuer.
"BUSINESS ACTIVITY REPORT" means (i) an Indiana Business Activity
Report from the Indiana Department of Revenue, Compliance Division, or (ii) a
Notice of Business Activities Report from the State of New Jersey Division of
Taxation, or
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<PAGE>
(iii) a Minnesota Business Activity Report from the Minnesota Department of
Revenue.
"BUSINESS DAY" means a day, in the applicable local time, which is not
a Saturday or Sunday or a legal holiday and on which banks are not required or
permitted by law or other governmental action to close in Los Angeles,
California or Chicago, Illinois.
"CAPITAL LEASE", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"CAPITAL STOCK", with respect to any Person, means any capital stock
of such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; and (ii) domestic and
eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies (fully protected against
currency fluctuations), which, at the time of acquisition, are rated A-1 (or
better) by Standard & Poor's Corporation or Prime-1 (or better) by Moody's
Investors Services, Inc.; PROVIDED, that the maturities of such Cash Equivalents
shall not exceed one year.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. Sections 9601 ET SEQ., any amendments
thereto, any successor statutes, and any regulations or guidance promulgated
thereunder.
"CERTIFICATES OF DESIGNATION" means, collectively, the Certificate of
Designation of the Series A Preferred Stock and the Certificate of Designation
of the Series B Preferred Stock; and "CERTIFICATE OF DESIGNATION" means either
of them.
"CLAIM" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"CLOSING DATE" means the date the "Term Loan" under (and as defined
in) the Term Loan Agreement is made.
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<PAGE>
"COGNIZANT SECURITY OFFICE" means the office of the Defense
Investigative Service Director of Industrial Security that has industrial
security jurisdiction over the geographical area in which a contractor is
located.
"COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Issuer.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, extremely hazardous waste, special waste, petroleum
or petroleum-derived substance or waste, asbestos, PCBs, or any constituent of
any such substance or waste, and includes, but is not limited to, these terms as
defined in any Environmental Law, as well as any other substance which is
required by any Governmental Authority to be investigated, cleaned up, removed,
treated or otherwise abated or which is regulated by such Governmental
Authority.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by which
it or any of its properties is bound, or to which it or any of its properties is
subject.
"CORPORATE DOCUMENTS" means, with respect to any corporation, (i) the
articles/certificate of incorporation (or the equivalent organizational
documents) of such corporation, (ii) the by-laws (or the equivalent governing
documents) of the corporation and (iii) any document setting forth the
designation, amount and/or relative rights, limitations and preferences of any
class or series of such corporation's Capital Stock.
"CUSTOMARY PERMITTED LIENS" means
(i) Liens (other than Environmental Liens and Liens in favor of
the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
Liens imposed by law created in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which
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<PAGE>
adequate reserves or other appropriate provisions are being maintained
in accordance with GAAP;
(iii) Liens (other than Environmental Liens and Liens in favor
of the PBGC) incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety and performance bonds; PROVIDED,
that (A) all such Liens do not in the aggregate materially detract
from the value of the Issuer's or any of its Subsidiaries' respective
assets or Property or materially impair the use thereof in the
operation of their respective businesses, and (B) all such Liens in
connection with worker's compensation, unemployment insurance or other
types of social security benefits deposits shall secure obligations in
an aggregate principal amount not exceeding $50,000 at any time
outstanding; and
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or
encumbrances on the use of Real Property which do not interfere with
the ordinary conduct of the business of the Issuer or any of its
Subsidiaries.
"DIVIDEND PAYMENT DATE" means, with respect to each series of
Preferred Stock, each "Dividend Payment Date" under (and as defined in) the
applicable Certificate of Designation with respect to which the Board of
Directors declares dividends on such series of Preferred Stock out of funds of
the Issuer legally available therefor.
"DOD" means the United States Department of Defense, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOL" means the United States Department of Labor, all constituent
agencies thereof and any Person succeeding to the functions thereof.
"DOLLARS" and "$" mean the lawful money of the United States.
"ENVIRONMENTAL LAW" means any Requirement of Law derived from or
relating to federal, state and local laws or regulations relating to or
addressing the environment, health or safety, including but not limited to
CERCLA, OSHA and RCRA, and any state or local equivalent thereof.
-5-
<PAGE>
"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental Law, or (ii) damages
arising from, or costs incurred by such Governmental Authority in response to, a
Release or threatened Release of a Contaminant into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACTS" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure of
any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Environmental Cleanup
Responsibility Acts" or "Responsible Transfer Acts".
"EQUIPMENT" means all of the Issuer's and each of its Subsidiaries'
respective present and future (i) equipment, including, without limitation,
machinery, manufacturing, distribution, selling, data processing and office
equipment, assembly systems, tools, molds, dies, fixtures, appliances,
furniture, furnishings, vehicles, vessels, aircraft, aircraft engines, and trade
fixtures, (ii) other tangible personal Property (other than the Issuer's and
each such Subsidiary's respective Inventory), and (iii) any and all accessions,
parts and appurtenances attached to any of the foregoing or used in connection
therewith, and any substitutions therefor and replacements, products and
proceeds thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, any
amendments thereto, any successor statutes, and any regulations promulgated
thereunder.
"ERISA AFFILIATE" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Issuer; (ii) a partnership or other trade or
business (whether or not incorporated) which is under common control (within the
meaning of Section 414(c) of the Internal Revenue Code) with the Issuer; and
(iii) a member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Issuer, any corporation
described in CLAUSE (i) above or any partnership or trade or business described
in CLAUSE (ii) above.
"EVENT OF DEFAULT" means any of the occurrences set forth in
SECTION 9.01 after the expiration of any applicable grace period and the giving
of any applicable notice, in each case as expressly provided in SECTION 9.01.
"EXPORT LICENSE" means any and all licenses, authorizations, approvals
or applications therefor relating to exports, reexports, temporary exports,
temporary imports and imports, as the case may be, granted by or pending before
the United States Department of Commerce, the United States
-6-
<PAGE>
Department of State or any other United States Governmental Authority.
"FACILITY SECURITY CLEARANCE" means an administrative determination by
the applicable United States Government Authority that, from a security
viewpoint, a facility is eligible for access to classified information of a
certain category and all lower categories.
"FAIR MARKET VALUE" means, with respect to any asset, the value of the
consideration obtainable in a sale of such asset in the open market, assuming a
sale by a willing seller to a willing purchaser dealing at arm's length and
arranged in an orderly manner over a reasonable period of time, each having
reasonable knowledge of the nature and characteristics of such asset, neither
being under any compulsion to act, determined (a) in good faith by the board of
directors of the Issuer or (b) in an appraisal of such asset, PROVIDED, that
such appraisal was performed relatively contemporaneously with such sale by an
independent third party appraiser and the basic assumptions underlying such
appraisal have not materially changed since the date thereof.
"FISCAL YEAR" means the fiscal year of the Issuer, which shall be the
12-month period ending on December 31 of each calendar year.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of the Issuer, any of its Subsidiaries or any of its
ERISA Affiliates and is not covered by ERISA pursuant to ERISA Section 4(b)(4).
"FOREIGN PENSION PLAN" means any employee benefit plan as defined in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of the Issuer, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA,
and (iii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accounting Standards Board or in such other
statements by such other entity as may be in general use by significant segments
of the accounting profession as in effect on the date hereof (unless otherwise
specified herein as in effect on another date or dates).
"GENERAL INTANGIBLES" means all of the Issuer's and its Subsidiaries'
respective present and future (i) general intangibles, (ii) rights, interests,
choses in action, causes of action, claims and other intangible Property of
every kind and
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nature (other than accounts), (iii) corporate and other business records,
(iv) loans, royalties, and other obligations receivable, (v) trademarks,
registered trademarks, trademark applications, service marks, registered
service marks, service mark applications, patents, patent applications, trade
names, rights of use of any name, labels, fictitious names, inventions,
designs, trade secrets, computer programs, software, printouts and other
computer materials, goodwill, registrations, copyrights, copyright
applications, permits, licenses, franchises, customer lists, credit files,
correspondence, and advertising materials, (vi) customer and supplier
contracts, firm sale orders, rights under license and franchise agreements,
rights under tax sharing agreements, and other contracts and contract rights,
(vii) interests in partnerships and joint ventures, (viii) tax refunds and
tax refund claims, (ix) right, title and interest under leases, subleases,
licenses and concessions and other agreements relating to Property, (x)
deposit accounts (general or special) with any bank or other financial
institution, (xi) credits with and other claims against third parties
(including carriers and shippers), (xii) rights to indemnification and with
respect to support and keep-well agreements, (xiii) reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts, (xiv) proceeds of insurance of which the Issuer or such
Subsidiary is beneficiary, (xv) letters of credit, guarantees, Liens,
security interests and other security held by or granted to the Issuer or
such Subsidiary, (xvi) uncertificated securities, and (xvii) governmental
certificates and certifications, including, without limitation, certificates
and certifications relating to Government Contracts and Export Licenses,
authorizations and approvals, issued to the Issuer or such Subsidiary.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GOVERNMENT CONTRACT" means any bid, quotation, proposal, contract,
agreement, work authorization, lease, commitment or sale or purchase order of
the Issuer or any of its Subsidiaries which is entered into with or submitted to
any United States Governmental Authority or any agency, agent or instrumentality
thereof, including, among other things, all contracts and work authorizations to
supply goods and services to the United States Government.
"HOLDERS" means the Stockholders and the Noteholders.
"INDEBTEDNESS", as applied to any Person, means, at any time, (i) all
indebtedness, obligations or other liabilities of such Person (A) for borrowed
money or evidenced by debt securities, debentures, acceptances, notes or other
similar instru-
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ments, and any accrued interest, fees and charges relating thereto, (B) under
profit payment agreements or in respect of obligations to redeem, repurchase
or exchange any Securities of such Person or to pay dividends in respect of
any stock, (C) with respect to letters of credit issued for such Person's
account, (D) to pay the deferred purchase price of property or services,
except accounts payable and accrued expenses arising in the ordinary course
of business, (E) in respect of Capital Leases, (F) which are Accommodation
Obligations or (G) under warranties and indemnities; (ii) all indebtedness,
obligations or other liabilities of such Person or others secured by a Lien
on any property of such Person, whether or not such indebtedness, obligations
or liabilities are assumed by such Person, all as of such time; (iii) all
preferred stock subject (upon the occurrence of any contingency or otherwise)
to mandatory redemption; and (iv) all contingent Contractual Obligations with
respect to any of the foregoing.
"INITIAL HOLDER" is defined in the preamble hereto.
"INTEREST PAYMENT DATE" means each March 31, June 30, September 30 and
December 31 during the term of this Agreement.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"INVENTORY" means all of the Issuer's and each of its Subsidiaries'
respective present and future (i) inventory, (ii) goods, merchandise and other
personal Property furnished or to be furnished under any contract of service or
intended for sale or lease, and all consigned goods and all other items which
have previously constituted Equipment but are then currently being held for sale
or lease in the ordinary course of the Issuer's or such Subsidiary's business,
(iii) raw materials, work-in-process and finished goods, (iv) materials and
supplies of any kind, nature or description used or consumed in the Issuer's or
such Subsidiary's business or in connection with the manufacture, production,
packing, shipping, advertising, finishing or sale of any of the Property
described in CLAUSES (i) through (iii) above, (v) goods in which the Issuer or
such Subsidiary has a joint or other interest or right of any kind (including,
without limitation, goods in which the Issuer or such Subsidiary has an interest
or right as consignee), and (vi) goods which are returned to or repossessed by
the Issuer or such Subsidiary; in each case whether in the possession of the
Issuer, such Subsidiary, a bailee, a consignee, or any other Person for sale,
storage, transit, processing, use or otherwise, and any and all documents for or
relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person,
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(ii) any purchase by that Person of all or substantially all of the assets of
a business conducted by another Person, and (iii) any loan, advance (other
than deposits with financial institutions available for withdrawal on demand,
prepaid expenses, accounts receivable, advances to employees and similar
items made or incurred in the ordinary course of business) or capital
contribution by that Person to any other Person, including all Indebtedness
to such Person arising from a sale of property by such Person other than in
the ordinary course of its business. The amount of any Investment shall be
the original cost of such Investment, plus the cost of all additions thereto
less the amount of any return of capital or principal to the extent such
return is in cash with respect to such Investment without any adjustments for
increases or decreases in value or write-ups, write-downs or write-offs with
respect to such Investment.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"ISSUER" is defined in the preamble hereto.
"LIABILITIES AND COSTS" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful or
wanton injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation, attorney,
expert and consulting fees and costs of investigation, feasibility or Remedial
Action studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever in
respect of any property of a Person, whether granted voluntarily or imposed by
law, and includes the interest of a lessor under a Capital Lease or under any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement or similar notice (other
than a financing statement filed by a "true" lessor pursuant to Section 9-408 of
the Uniform Commercial Code), naming the owner of such property as debtor, under
the Uniform Commercial Code or other comparable law of any jurisdiction.
"LIQUIDATION PREFERENCE" means, with respect to each series of
Preferred Stock, the "Liquidation Preference" under (and as defined in) the
Certificate of Designation pursuant to which such Preferred Stock was issued.
"MAJORITY HOLDERS" means, as of any date of determination, (i)
Noteholders holding, in the aggregate, greater
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than fifty percent (50%) in principal amount of all Notes outstanding as of
such date, (ii) Stockholders holding, in the aggregate, greater than fifty
percent (50%) of the Shares of Series A Preferred Stock issued and
outstanding as of such date and (iii) Stockholders holding, in the aggregate,
greater than fifty percent (50%) of the Shares of Series B Preferred Stock
issued and outstanding as of such date.
"MAL" means Microdot Aerospace Limited, a company organized under the
laws of the United Kingdom, and a wholly-owned Subsidiary of Microdot.
"MAL PURCHASE AGREEMENT" means, to the extent the assets of MAL have
been made available in accordance with the AFS Purchase Agreement, the agreement
by and between MAL, Opco and the U.K. Subsidiary, pursuant to which Opco and the
U.K. Subsidiary agree to purchase substantially all of the assets of MAL, which
agreement shall be in form and substance satisfactory to the Initial Holder.
"MANAGEMENT INVESTORS" means Jordan A. Law, David A. Werner, Leroy A.
Dack, Robert L. Beers, Imre Berecz, Joseph Varholick and Joseph F. Blomberg.
"MANAGEMENT SUBSCRIPTION AGREEMENTS" means the respective Subscription
Agreements between the Issuer and each of the Management Investors, pursuant to
which the Issuer agrees to sell and the Management Investors subscribe to
purchase an aggregate of 20,500 shares of Common Stock.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (i) the
financial condition, operations, assets or prospects of the Issuer, Opco or any
of their respective Subsidiaries, (ii) the ability of the Issuer, Opco or any of
their respective Subsidiaries to perform their respective obligations under the
Transaction Documents, or (iii) the ability of any Holder to enforce this
Agreement or the Notes held by such Holder.
"MICRODOT" means Microdot Inc., a Delaware corporation.
"MICRODOT LOAN AGREEMENT" means that certain Loan and Security
Agreement dated as of December 30, 1983 between the Initial Holder and Microdot,
as amended, as amended and restated by that certain Amended and Restated Loan
and Security Agreement dated as of April 1, 1989 between the Initial Holder and
Microdot, as further amended by Amendment No. 1 thereto dated as of December 8,
1992.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Issuer or any ERISA Affiliate.
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"NOTE" is defined in SECTION 2.01(a).
"NOTEHOLDER" means each holder of record of Notes as it appears on
the books of the Issuer.
"OBLIGATIONS" means the Indebtedness evidenced by the Notes and all
advances, debts, liabilities, obligations, covenants and duties owing by the
Issuer to the Noteholders, or any Person entitled to indemnification pursuant
to SECTION 10.02 of this Agreement, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other instrument, arising
under this Agreement or the Notes, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due,
now existing or hereafter arising and however acquired. The term includes,
without limitation, all interest (including, without limitation, interest,
whether or not allowed under Section 502 of the Bankruptcy Code or otherwise,
at the then applicable rate (including the rate in effect from time to time
under SECTION 2.02(c)) specified herein that accrues after the commencement
of any proceeding under the Bankruptcy Code or other applicable bankruptcy,
reorganization, insolvency, dissolution, liquidation or other debtor relief
Requirement of Law), charges, expenses, fees, attorneys' fees and
disbursements and any other sum chargeable to the Issuer under this Agreement
or any of the Notes.
"OFFICER'S CERTIFICATE" means a certificate executed on behalf of a
corporation by (i) the chairman or vice-chairman of its board of directors
(if an officer of such corporation) or (ii) its president, any of its
vice-presidents, its chief financial officer, or its treasurer.
"OPCO" means Kaynar Technologies Inc., a Delaware corporation.
"OPCO CREDIT AGREEMENT" means that certain Credit Agreement of even
date herewith by and between Opco and the Initial Holder, as the same may be
amended, supplemented or modified from time to time.
"OPCO LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Opco Credit Agreement.
"OPERATING LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is
not a Capital Lease.
"OSHA" means the Occupational Safety and Health Act of 1970, any
amendments thereto, any successor statutes and any regulations or guidance
promulgated thereunder.
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"PBGC" means the Pension Benefit Guaranty Corporation and any
Person succeeding to the functions thereof.
"PCBS" means polychlorinated biphenyls.
"PERMITS" means any license, permit, variance, interim permit,
permit application, approval, consent, certification, qualification or other
authorization under any Requirement of Law applicable to the Issuer or any of
its Subsidiaries or otherwise required by any Governmental Authority in
connection with the business or operations of the Issuer or any of its
Subsidiaries, including, without limitation, any license, permit, consent,
certification, approval, authorization or qualification relating to any
Government Contract.
"PERMITTED EXISTING ACCOMMODATION OBLIGATIONS" means the Accommodation
Obligations of the Issuer and its Subsidiaries identified as such on
SCHEDULE 1.01.1.
"PERSON" means any natural person, corporation, limited partnership,
general partnership, joint stock company, joint venture, association, company,
trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any Governmental Authority.
"PERSONNEL SECURITY CLEARANCE" means an administrative determination
by the applicable United States Governmental Authority that an individual is
eligible, from a security point of view, for access to classified information of
the same or lower category as the level of the personnel clearance being
granted.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(i) in respect of which the Issuer or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA and (ii) which is not a Foreign Pension Plan or Foreign
Employee Benefit Plan.
"POTENTIAL EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"PREFERRED STOCK" means the Series A Preferred Stock and the Series B
Preferred Stock.
"PROCESS AGENT" is defined in SECTION 10.16.
"PROPERTY" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, Equipment,
Inventory, General Intangible, account, or other asset owned, leased or operated
by the Issuer or its Subsidiaries, as applicable, (including any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
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"PRO RATA SHARE" means, with respect to any Noteholder, the
percentage obtained by dividing (i) the unpaid balance of the outstanding
Notes held by such Noteholder by (ii) the aggregate unpaid balance of all
outstanding Notes issued pursuant to this Agreement.
"PURCHASE" means, collectively, (i) the purchase by Opco from
Microdot of substantially all of the assets of AFS pursuant to the AFS
Purchase Agreement and (ii) to the extent the assets of MAL have been made
available in accordance with the AFS Purchase Agreement, the purchase by Opco
and the U.K. Subsidiary of substantially all of the assets of MAL pursuant to
the MAL Purchase Agreement.
"PURCHASE AGREEMENTS" means the AFS Purchase Agreement and, to the
extent the assets of MAL have been made available in accordance with the AFS
Purchase Agreement, the MAL Purchase Agreement, and "PURCHASE AGREEMENT"
means either of them.
"PURCHASE DOCUMENTS" means the Purchase Agreements and all of the
agreements, documents and instruments executed in connection with either of
them.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Sections 6901 ET SEQ., any amendments thereto, any successor statutes,
and any regulations or guidance promulgated thereunder.
"REAL PROPERTY" means all of the Issuer's and each of its
Subsidiaries' respective present and future right, title and interest
(including, without limitation, any leasehold estate) in (i) any plots,
pieces or parcels of land, (ii) any improvements, buildings, structures and
fixtures now or hereafter located or erected thereon or attached thereto of
every nature whatsoever (the rights and interests described in CLAUSE (i) or
(ii) above being the "Premises"), (iii) all easements, rights of way, gores
of land or any lands occupied by streets, ways, alleys, passages, sewer
rights, water courses, water rights and powers, and public places adjoining
such land, and any other interests in property constituting appurtenances to
the Premises, or which hereafter shall in any way belong, relate or be
appurtenant thereto, (iv) all hereditaments, gas, oil, minerals (with the
right to extract, sever and remove such gas, oil and minerals), and
easements, of every nature whatsoever, located in or on the Premises and
(v) all other rights and privileges thereunto belonging or appertaining and all
extensions, additions, improvements, betterments, renewals, substitutions and
replacements to or of any of the rights and interests described in
CLAUSE (iii) or (iv) above.
"RELEASE" means release, presence, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment or into or out of any
Property or Third Party
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Property, including the movement of Contaminants through or in the air, soil,
surface water, groundwater, Property or Third Party Property.
"REMEDIAL ACTION" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"REPORTABLE EVENT" means any of the events described in Section
4043 of ERISA and the regulations promulgated thereunder as in effect from
time to time, excluding any event with respect to which the 30-day notice
requirement is waived in the applicable regulations.
"REQUIREMENTS OF LAW" means, as to any Person, the charter and
by-laws or other organizational or governing documents of such Person, and
any law, rule or regulation, or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property
is subject including, without limitation, the Securities Act, the Securities
Exchange Act, ERISA, the Fair Labor Standards Act and any certificate of
occupancy, zoning ordinance, building, environmental or land use requirement
or Permit or environmental, labor, employment, occupational safety or health
law, ordinance, rule, regulation or common law.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of the Issuer or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of
stock or in any junior class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of the Issuer or any of its Subsidiaries now or hereafter
outstanding, and (iii) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of Capital Stock of the Issuer or
any of its Subsidiaries now or hereafter outstanding.
"SCHEDULED MATURITY DATE" means the fifth (5th) anniversary of the
Closing Date.
"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or any certificates of
interest, shares, or participations in temporary or interim certificates for
the purchase or
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acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time, and any successor statute.
"SERIES A PREFERRED STOCK" means the Series A Convertible Preferred
Stock, par value $0.01 per share, of the Issuer.
"SERIES B PREFERRED STOCK" means the Series B Preferred Stock, par
value $0.01 per share, of the Issuer.
"SHAREHOLDERS AGREEMENT" means that certain Shareholders Agreement
dated as of January 3, 1994 among the Issuer, the Initial Holder and the
Management Investors regarding transfers of, restrictions on and other rights
and conditions relating to the Common Stock and the Preferred Stock, as the
same may be amended, supplemented or modified from time to time.
"SOLVENT", when used with respect to any Person, means that at the
time of determination:
(i) the Fair Market Value of its assets is in excess of the
total amount of its liabilities (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater
than its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts
(including, without limitation, contingent debts and other commitments) as
they mature; and
(iv) it has capital sufficient to carry on its business as conducted
and as proposed to be conducted.
"STOCKHOLDER" means each holder of record of shares of Series A
Preferred Stock or Series B Preferred Stock as it appears on the share register
of the Issuer.
"SUBSIDIARY" of a Person means any corporation or other entity of
which securities 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 or controlled by such
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Person, one or more of the other subsidiaries of such Person or any
combination thereof.
"TAXES" is defined in SECTION 3.03(a).
"TERM LOAN AGREEMENT" means that certain Term Loan Agreement by and
between the Issuer and the Initial Holder, as the same may be amended,
supplemented or modified from time to time.
"TERM LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Term Loan Agreement.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Issuer or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Issuer or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA or the
cessation of operations of a facility which results in the termination of
employment of 20% of Benefit Plan participants who are employees of the Issuer
or any ERISA Affiliate; (iii) the imposition of an obligation on the Issuer or
any ERISA Affiliate under Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC or any
similar foreign Governmental Authority of proceedings to terminate a Benefit
Plan or a Foreign Pension Plan; (v) any event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan;
(vi) a foreign Governmental Authority shall appoint or institute proceedings to
appoint a trustee to administer any Foreign Pension Plan; or (vii) the partial
or complete withdrawal of the Issuer or any ERISA Affiliate from a Multiemployer
Plan or a Foreign Pension Plan.
"THIRD PARTY PROPERTY" means any real or personal property, plant,
building, facility, structure, underground storage tank or unit or equipment
owned, leased or operated by any Person other than the Issuer or its
Subsidiaries (including, without limitation, any surface water thereon or
adjacent thereto and soil and ground water thereunder).
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Issuer, Opco and their respective Subsidiaries in connection with the execution,
delivery and performance of the Transaction Documents.
"TRANSACTION DOCUMENTS" means (i) this Agreement and the Notes, (ii)
the Term Loan Documents, (iii) the Opco Loan Documents and (iv) the Purchase
Documents.
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"U.K. SUBSIDIARY" means Kaynar Technologies Ltd., a wholly-owned
Subsidiary of Opco organized under the laws of England and Wales.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code as enacted
in the State of California, as it may be amended from time to time.
1.02. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding". Periods of days referred to in this Agreement shall be
counted in calendar days unless Business Days are expressly prescribed. Any
period determined hereunder by reference to a month or months or year or years
shall end on the day in the relevant calendar month in the relevant year, if
applicable, immediately preceding the date numerically corresponding to the
first day of such period, PROVIDED, that if such period commences on the last
day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month during which such period is to end),
such period shall, unless otherwise expressly required by the other provisions
of this Agreement, end on the last day of the calendar month.
1.03. ACCOUNTING TERMS. Subject to SECTION 10.03, for purposes of
this Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.04. OTHER TERMS. All other terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings assigned to
such terms by the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
THE NOTES
2.01. ISSUANCE OF NOTES. (a) AMOUNTS AND SERIES OF NOTES. Subject
to the terms and conditions set forth in this Agreement, on each Dividend
Payment Date through and including the Scheduled Maturity Date, if the Issuer
has not paid all dividends declared to be payable on such Dividend Payment Date
in cash (or if the Issuer is then prohibited by law or contract from paying
dividends in cash on the Preferred Stock), the Issuer shall issue, in two
separate series, promissory notes in substantially the form of EXHIBIT A
attached hereto and made a part hereof (collectively, the "Notes") dated such
Dividend Payment Date to each Stockholder of record of shares of Series A
Preferred Stock and Series B Preferred Stock, respectively, appearing on the
share register of the Issuer on the tenth (10th) day preceding the relevant
Dividend Payment Date, PROVIDED that the Notes may have notations, legends or
endorsements required by
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law, stock exchange rule or usage (including any legend required by the
Internal Revenue Code if the Notes are considered to be issued with "original
issue discount"). Each issuance of Notes shall be issued in accordance with
a resolution of the Board of Directors, and shall be designated generally as
the "PIK Dividend Notes" of the Issuer, with such further particular
designations added or incorporated into such title for the Notes of any
particular series as the Board of Directors may determine. With respect to
any particular series of Notes, the Board Resolution relating thereto shall
specify, to the extent deemed appropriate by the Board of Directors, the
title of the Notes of that series (which shall distinguish the Notes of that
series from all other Notes); PROVIDED that, notwithstanding anything herein
to the contrary, Notes may be issued hereunder only (a) in payment of
dividends and in lieu of payment of dividends in cash and (b) in substitution
or replacement of other Notes as provided in SECTION 2.01(f). With respect
to the series of Notes from time to time issued to the Stockholders of Series
A Preferred Stock, the Issuer shall issue to each such Stockholder a Note in
a principal amount equal to the excess (if any) of (i) the amount of the
dividend declared to be payable to such Stockholder as of the relevant
Dividend Payment Date over (ii) the cash payment paid to such Stockholder in
respect of the dividends declared to be paid as of such Dividend Payment
Date. With respect to the series of Notes from time to time issued to the
Stockholders of Series B Preferred Stock, the Issuer shall issue to each such
Stockholder a Note in a principal amount equal to the excess (if any) of
(x) the amount of the dividend declared to be payable to such Stockholder as of
the relevant Dividend Payment Date over (y) the cash payment paid to such
Stockholder in respect of the dividends declared to be paid as of such
Dividend Payment Date.
(b) CONDITIONS TO ISSUANCE. In addition to the conditions set forth
in this Agreement, the Issuer shall not issue or pay any Notes under this
Agreement in violation of law or applicable directors' duties, and unless and
until all of the conditions for the declaration and payment of dividends set
forth in the applicable Certificate of Designation shall have been satisfied.
(c) REPAYMENT OF THE NOTES. (i) The outstanding principal balance
of the Notes (including, without limitation, the principal balance of the Notes
attributable to interest capitalized in accordance with the terms of SECTION
2.02(b)(i)) shall be payable in full on the earlier of (x) the Scheduled
Maturity Date (or, if not a Business Day, the immediately preceding Business
Day), and (y) the date of acceleration of the Obligations pursuant hereto.
(ii) In addition to the scheduled payment on the Notes, the Issuer
may make the voluntary prepayments described in SECTION 3.01 for credit against
such scheduled payments on the Notes pursuant to SECTION 3.01.
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(d) NOTEHOLDER LIST. The Issuer 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.
(e) TRANSFER AND EXCHANGE. Where Notes are presented to the Issuer
with a request to register a transfer or to exchange them for an equal principal
amount of Notes of other permitted denominations of like series, the Issuer
shall register the transfer or make the exchange and, upon surrender of the
existing Notes, shall issue such new Notes as shall be necessary to evidence
such transfer or exchange. No service charge shall be made for any registration
of transfer or exchange (except as otherwise expressly permitted herein), but
the Issuer may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith. The Issuer shall
not be required (i) to issue, register the transfer of or exchange Notes during
a period beginning at the opening of business 15 days before the day of any
selection of Notes for prepayment of Notes under SECTION 3.01 and ending at the
close of business on the day of selection, or (ii) to register the transfer or
exchange of any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(f) REPLACEMENT NOTES. If a Noteholder claims that its Note has been
mutilated, lost, destroyed or wrongfully taken, the Issuer shall issue a
replacement Note, PROVIDED that, if required by the Issuer, an indemnity bond
must be provided by such Noteholder in an amount which is sufficient in the
judgment of the Issuer to protect the Issuer from any loss which any of them may
suffer if a Note is replaced. The Issuer may charge for their expenses in
replacing a Note. In case any such mutilated, lost, destroyed or wrongfully
taken Note has become or is about to become due and payable, the Issuer, in its
discretion, may, instead of issuing a new Note, pay such Note. Every
replacement Note is an additional Obligation of the Issuer.
(g) OUTSTANDING NOTES. The Notes outstanding at any time are all the
Notes issued by the Issuer except for those cancelled by it, those delivered to
it for cancellation, and those described in this SECTION 2.01(G) as not
outstanding. If a Note is replaced pursuant to SECTION 2.01(F), it ceases to be
outstanding unless the Issuer receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser. If Notes are fully paid in
cash, they cease to be outstanding and interest on them ceases to accrue. A
Note does not cease to be outstanding solely because the Issuer or an Affiliate
of the Issuer holds the Note.
(h) TREASURY NOTES. In determining whether the Noteholders of the
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Issuer or an Affiliate of the Issuer shall be
considered as though they are not outstanding.
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2.02. INTEREST. (a) RATE OF INTEREST. The Indebtedness evidenced
by each Note and the outstanding principal balance of all other Obligations
shall bear interest on the unpaid principal amount thereof from the date such
Note is issued and such other Obligations are due and payable until paid in
full, except as otherwise provided in SECTION 2.02(c), at a per annum rate equal
to (i) for the period commencing on the Closing Date and ending on December 31,
1995, nine and one-half percent (9.50%) and (ii) for the period commencing on
January 1, 1996 and ending on the date the Obligations are paid in full, eleven
and one-half percent (11.50%).
(b) INTEREST PAYMENTS. (i) Interest accrued on the Notes shall be
payable in arrears (A) with respect to interest accrued and unpaid as of any
Interest Payment Date, on the day immediately following such Interest Payment
Date, commencing on the first such day immediately following March 31, 1994, (B)
upon the payment or prepayment of the Notes in full, and (C) if not theretofore
paid in full, at maturity (whether by acceleration or otherwise) of the Notes.
Accrued and unpaid interest on the outstanding principal balance of the Notes
may, at the option of the Issuer, be paid in immediately available funds in
accordance with the immediately preceding sentence and SECTION 3.02(a). If not
so paid, such interest shall be capitalized on the day immediately following the
applicable Interest Payment Date, and the outstanding principal balance of the
Notes shall automatically and without notice of any kind whatsoever be increased
by an amount equal to such interest.
(ii) Interest accrued on the principal balance of all other
Obligations shall be payable in immediately available funds in arrears (A) on
the last day of each calendar month, commencing on the first such day following
the incurrence of such Obligation, (B) upon repayment thereof in full or in
part, and (C) if not theretofore paid in full, at the time such other Obligation
becomes due and payable (whether by acceleration or otherwise).
(c) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTION 2.02(a) or elsewhere in this Agreement, effective
immediately upon (i) the occurrence of an Event of Default described in
SECTION 9.01(a) or (ii) the occurrence of any other Event of Default and notice
from the Majority Holders of the effectiveness of this SECTION 2.02(c), and for
as long thereafter as such Event of Default shall be continuing, the principal
balance of the Notes, and the principal balance of all other Obligations, shall
bear interest at a per annum rate which is two percent (2.0%) per annum in
excess of the interest rate otherwise applicable under SECTION 2.02(a).
(d) COMPUTATION OF INTEREST. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on each
Note, the date of
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issuance of such Note shall be included and the date of payment shall be
excluded.
2.03. AUTHORIZED OFFICERS AND AGENTS. On the Closing Date and from
time to time thereafter when necessary, the Issuer shall deliver to the Holders
an Officer's Certificate setting forth the names of the officers, employees and
agents authorized to act for the Issuer in respect of all matters relating to
the this Agreement and the Notes and containing a specimen signature of each
such officer, employee or agent. The Holders shall be entitled to rely
conclusively on such officer's or employee's authority to act hereunder until
the Holders receive written notice to the contrary. The Holders shall have no
duty to verify the authenticity of the signature appearing on any written
document.
ARTICLE III
PAYMENTS AND PREPAYMENTS
3.01. VOLUNTARY PREPAYMENTS. The Issuer may, upon at least one (1)
Business Day's prior written notice to the Noteholders, at any time and from
time to time, prepay the Notes, in whole or in part. Unless the aggregate
outstanding principal balance of the Notes is to be prepaid in full, voluntary
prepayments of the Notes shall be in an aggregate minimum amount of $100,000 and
integral multiples of $100,000 in excess of that amount. Any notice of
prepayment given to the Noteholders under this SECTION 3.01 shall specify the
date (which shall be a Business Day) of prepayment and the aggregate principal
amount of the prepayment. When notice of prepayment is delivered as provided
herein, the principal amount of the Notes specified in the notice shall become
due and payable on the prepayment date specified in such notice. The
prepayments described in this SECTION 3.01 may be made without premium or
penalty.
3.02. PAYMENTS. (a) MANNER AND TIME OF PAYMENT. All payments and
prepayments of principal of and interest on the Notes and other Obligations
(including, without limitation, fees and expenses) which are payable to the
Noteholders shall be made without condition or reservation of right, in
immediately available funds (except to the extent otherwise permitted by SECTION
2.02(b)(i)), delivered to the Noteholders not later than 1:00 p.m. (Chicago
time) on the date and at the place due, to such account of each Noteholder as
such Noteholder may designate; and funds received by each Noteholder not later
than 1:00 p.m. (Chicago time) on any given Business Day shall be credited
against payment to be made that day and funds received by the Holders after that
time shall be deemed to have been paid on the immediately following Business
Day.
(b) APPLICATION OF PAYMENTS. (i) Subject to the provisions of
SECTION 3.01, all payments of principal and interest in respect of the Notes,
all payments of fees and all
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other payments in respect of any other Obligations, shall be allocated among
such of the Noteholders as are entitled thereto, in proportion to their
respective Pro Rata Shares and shall be applied FIRST, to pay all Obligations
then due and payable and SECOND, as the Issuer so designates.
(ii) After the occurrence of an Event of Default and while the same is
continuing, the Noteholders shall apply all payments in respect of any
Obligations in the following order:
(A) FIRST, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Noteholders;
(B) SECOND, to pay interest due in respect of the Notes;
(C) THIRD, to the payment or prepayment of principal outstanding
on the Notes; and
(D) FOURTH, to the payment of all other Obligations.
(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
by the Issuer hereunder or under the Notes is stated to be due on a day which is
not a Business Day, the payment shall instead be due on the immediately
following Business Day, and any such extension of time shall be included in the
computation of the payment of interest and fees hereunder.
3.03. TAXES. (a) PAYMENT OF TAXES. Any and all payments by the
Issuer hereunder or under the Notes or other document evidencing any Obligations
shall be made, in accordance with SECTION 3.02, free and clear of and without
reduction for any and all present or future taxes, levies, imposts, deductions,
charges, withholdings, and all stamp or documentary taxes, excise taxes, ad
valorem taxes and other taxes imposed on the value of the Property, charges or
levies which arise from the execution, delivery or registration, or from payment
or performance under, or otherwise with respect to, this Agreement or any of the
Notes and all other liabilities with respect thereto, excluding taxes imposed on
or measured by net income or overall gross receipts and capital and franchise
taxes imposed on the Noteholders by (i) the United States, (ii) the Governmental
Authority of any jurisdiction in which any Noteholders has an office or any
political subdivision thereof or (iii) the Governmental Authority in which a
Noteholders is organized, managed and controlled or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges and
withholdings being hereinafter referred to as "Taxes"). If the Issuer shall be
required by law to withhold or deduct any Taxes from or in respect of any sum
payable hereunder or under the Notes or document to any Noteholder (x) the sum
payable to such Noteholder shall be increased as may be necessary so that after
making all
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required withholding or deductions (including withholding or deductions
applicable to additional sums payable under this SECTION 3.03) such
Noteholder receives an amount equal to the sum it would have received had no
such withholding or deductions been made, (y) the Issuer shall make such
withholding or deductions, and (z) the Issuer shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) INDEMNIFICATION. The Issuer will indemnify the Noteholders
against, and reimburse each Noteholder on demand for, the full amount of all
Taxes (including, without limitation, any Taxes imposed by any Governmental
Authority on amounts payable under this SECTION 3.03 and any additional income
or franchise taxes resulting therefrom) incurred or paid by such Noteholder or
any of its Affiliate and any liability (including penalties, additions to tax,
interest, and out-of-pocket expenses paid to third parties) arising therefrom or
with respect thereto, whether or not such Taxes were lawfully payable. A
certificate as to any additional amount payable to any Person under this SECTION
3.03 submitted by it to the Issuer shall, absent manifest error, be final,
conclusive and binding upon all parties hereto. Each Noteholder agrees, within
a reasonable time after receiving a written request from the Issuer, to provide
the Issuer with such certificates as are reasonably required, and take such
other actions as are reasonably necessary to claim such exemptions as such
Noteholder may be entitled to claim in respect of all or a portion of any Taxes
which are otherwise required to be paid or deducted or withheld pursuant to this
SECTION 3.03 in respect of any payments under this Agreement or under the Notes.
(c) RECEIPTS. Within thirty (30) days after the date of any payment
of Taxes by the Issuer, it will furnish to the applicable Noteholders, at its
address referred to in SECTION 10.07, the original or a certified copy of a
receipt evidencing payment thereof.
ARTICLE IV
CONDITIONS TO ISSUANCE OF NOTES
4.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. This
Agreement shall become effective against the Issuer and the Initial Holder upon
the satisfaction of all of the following conditions precedent:
(a) DOCUMENTS. The Initial Holder shall have received on or before
the Closing Date all of the following:
(i) this Agreement and all other agreements, documents and
instruments described in the List of Closing Documents attached hereto
as EXHIBIT B attached hereto and made a part hereof, each duly
executed where
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appropriate and in form and substance satisfactory to the Initial Holder;
(ii) the PRO FORMA financials referred to in SECTION 5.01(g);
(iii) documentation deemed adequate by the Initial Holder
showing the Issuer's and its Subsidiaries' compliance with any
financial responsibility requirements of applicable Requirements of
Law, including, without limitation, those contained in 40 C.F.R. Parts
264 and 265, Subps. H, and state law equivalents, and those
promulgated pursuant to 42 U.S.C. Section 6991b(c)(6), and state
equivalents; and
(iv) such additional documentation as the Initial Holder may
reasonably request.
(b) NO LEGAL IMPEDIMENTS. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Issuer shall not have
received any notice that litigation is pending or threatened which is likely to
(i) enjoin, prohibit or restrain (A) the effectiveness of this Agreement or the
issuance of the Notes pursuant hereto or (B) the consummation of the Purchase or
(ii) impose or result in the imposition of a Material Adverse Effect.
(c) NO DEFAULT. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the effectiveness of
this Agreement or the issuance of Notes pursuant hereto.
(d) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in SECTION 5.01 shall be true and correct in all material
respects on and as of the Closing Date.
(e) PURCHASE OF CAPITAL STOCK OF THE ISSUER. The Management
Investors shall have purchased all of the issued and outstanding Common Stock
pursuant to the respective Management Subscription Agreements for an aggregate
purchase price of not less than $300,000 (less out-of-pocket transaction costs
for which the Management Investors are entitled to credit for this purpose in
accordance with the letter agreement on such subject, together with any
amendments or supplements thereto (if any), between the Management Investors and
the Initial Holder).
(f) THE PURCHASE. (i) All conditions precedent to, and all consents
necessary to permit, the Purchase pursuant to the Purchase Documents shall have
been satisfied or delivered, or waived with the prior written consent of the
Initial Holder, and the Purchase Documents shall not have been amended or
modified without the prior written consent of the Initial Holder and shall be in
full force and effect.
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(ii) Substantially simultaneously with the effectiveness of this
Agreement, the Term Loan Agreement and the Opco Credit Agreement, Opco shall
have acquired substantially all of the assets of AFS pursuant to the AFS
Purchase Agreement, and, to the extent the assets of MAL shall have been made
available for purchase on the Closing Date pursuant to the AFS Purchase
Agreement, Opco and the U.K. Subsidiary shall have acquired substantially all of
the assets of MAL pursuant to the MAL Purchase Agreement, in each case in
compliance with all applicable laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. CLOSING DATE REPRESENTATIONS AND WARRANTIES. In order to
induce the Initial Holder to enter into this Agreement on the Closing Date, the
Issuer hereby represents and warrants to the Initial Holder that the following
statements are true, correct and complete as of the Closing Date:
(a) ORGANIZATION; CORPORATE POWERS. The Issuer and each of its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii) is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which failure to be so qualified and in good
standing will have or is reasonably likely to have a Material Adverse Effect,
(iii) to the extent required, has filed and maintained effective (unless exempt
from the requirements for filing) a current Business Activity Report with the
appropriate Governmental Authority in the states of Minnesota, New Jersey and
Indiana, and (iv) has all requisite corporate power and authority to own,
operate and encumber its Property and to conduct its business as proposed to be
conducted in connection with and following the consummation of the transactions
contemplated by the Transaction Documents.
(b) AUTHORITY. (i) The Issuer and each of its Subsidiaries have the
requisite corporate power and authority (A) to execute, deliver and perform each
of the Transaction Documents which are to be executed by it in connection with
the Purchase or which have been executed by it as required by this Agreement on
or prior to the Closing Date and (B) to file the Transaction Documents which
must be filed by it in connection with the Purchase or which have been filed by
it as required by this Agreement on or prior to the Closing Date, with any
Governmental Authority.
(ii) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by the
Issuer in connection with the Purchase or which have been executed or filed as
required by this Agreement on or prior to the Closing Date and to which the
Issuer
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or any of its Subsidiaries is party and the consummation of the transactions
contemplated thereby, have been duly approved by the respective boards of
directors and, if necessary, the shareholders of the Issuer and its
Subsidiaries and such approvals have not been rescinded. No other corporate
action or proceedings on the part of the Issuer or its Subsidiaries are
necessary to consummate such transactions.
(iii) Each of the Transaction Documents to which the Issuer or any of
its Subsidiaries is a party has been duly executed, delivered or filed, as the
case may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, is in full force and effect
and no material term or condition thereof has been amended, modified or waived
from the terms and conditions contained in the Transaction Documents delivered
to the Initial Holder pursuant to SECTION 4.01(a) without the prior written
consent of the Initial Holder, and all parties thereto have performed and
complied with all the terms, provisions, agreements and conditions set forth
therein and required to be performed or complied with by such parties on or
before the Closing Date, and no Potential Event of Default, Event of Default or
breach of any covenant by any such party exists thereunder.
(c) CONSENTS. Except as set forth in SCHEDULE 5.01-C and for
approval of the Bankruptcy Court, no consents or approvals of, or filings or
registrations (other than filings or registrations contemplated by SECTION
5.01(f)(i) with respect to Government Contracts) by the Issuer or its
Subsidiaries with any Governmental Authority or any other Person not a party to
this Agreement are necessary in connection with the execution and delivery of
the Transaction Documents by the Issuer and its Subsidiaries and the
consummation by the Issuer and its Subsidiaries of the transactions contemplated
by the Transaction Documents, except where the failure to obtain such consents
or approvals would not result in a Material Adverse Effect.
(d) SUBSIDIARIES; OWNERSHIP OF CAPITAL STOCK. SCHEDULE 5.01-D
accurately sets forth (i) the correct legal name, the jurisdiction of
incorporation and the jurisdictions in which qualified to transact business as a
foreign corporation of each of the direct and indirect Subsidiaries of the
Issuer, (ii) the authorized, issued and outstanding shares of each class of
Capital Stock of the Issuer and each of its Subsidiaries and the owners of such
shares, and (iii) a summary of the direct and indirect partnership, joint
venture, or other equity interests, if any, of the Issuer and each of its
Subsidiaries in any Person that is not a corporation. None of such issued and
outstanding Capital Stock is subject to any vesting or redemption agreement, or,
except as provided in the Shareholders Agreement, repurchase agreement, and
there are no warrants or options outstanding with respect to such Capital Stock.
The outstanding Capital Stock of the Issuer and each of its Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable.
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(e) NO CONFLICT. The execution, delivery and performance of each of
the Transaction Documents to which the Issuer or any of its Subsidiaries is a
party do not and will not (i) conflict with the Corporate Documents of the
Issuer or any such Subsidiary, (ii) constitute a tortious interference with any
Contractual Obligation of any Person or conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under any
Requirement of Law or Contractual Obligation of the Issuer or any such
Subsidiary, or require termination of any Contractual Obligation, the
consequences of which violation, breach, default or termination, singly or in
the aggregate, will have or is reasonably likely to have a Material Adverse
Effect or is reasonably likely to subject the Initial Holder to any liability,
or (iii) result in or require the creation or imposition of any Lien whatsoever
upon any of the Property or assets of the Issuer or any such Subsidiary, other
than Liens contemplated by the Term Loan Documents or the Opco Loan Documents.
(f) PATENTS, TRADEMARKS, PERMITS, ETC.; GOVERNMENT APPROVALS. (i)
After giving effect to the Purchase, the Issuer and each of its Subsidiaries
own, are licensed or otherwise have the lawful right to use, or have all permits
and other governmental approvals (except with respect to Government Contracts),
patents, trademarks, trade names, copyrights, technology, know-how and processes
used in or necessary for the conduct of their businesses as proposed to be
conducted which are material to their condition (financial or otherwise),
operations, performance and prospects, taken as a whole, including, without
limitation, the names "Microdot", "Kaynar" and "Microdot Inserts". With respect
to each Government Contract acquired by Opco in connection with the Purchase,
such Government Contract has been transferred to Opco (and all necessary
approvals therefor have been obtained) or Opco is operating under a subcontract
contemplated by the AFS Purchase Agreement.
(ii) The consummation of the Purchase and the transactions
contemplated by the Transaction Documents will not impair the ownership of or
rights under (or the license or other right to use, as the case may be) any
permits and governmental approvals, patents, trademarks, trade names,
copyrights, technology, know-how or processes by the Issuer or any of its
Subsidiaries in any manner which has or is reasonably likely to have a Material
Adverse Effect.
(g) PRO FORMA FINANCIALS. The PRO FORMA consolidated and
consolidating balance sheets of the Issuer and its Subsidiaries prepared as of
October 31, 1993 (and giving effect to the Purchase) and in accordance with GAAP
consistently applied, copies of which have been furnished to the Initial Holder
on or before the Closing Date, fairly present on a PRO FORMA basis the financial
condition of the Issuer and such Subsidiaries as of October 31, 1993, and
reflect on a PRO FORMA basis those liabilities reflected in the notes thereto
and resulting from
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consummation of the transactions contemplated by the Transaction Documents,
and the payment or accrual of all Transaction Costs payable on the Closing
Date with respect to any of the foregoing. The projections and assumptions
expressed in the PRO FORMA financials furnished pursuant to this
SECTION 5.01(g) are reasonable based on the information available to the
Issuer as of the date hereof.
(h) SOLVENCY. After giving effect to the making of the "Term Loan"
under (and as defined) in the Term Loan Agreement on the Closing Date, the
Issuer and each of its Subsidiaries are Solvent.
(i) THE PURCHASE. (i) All conditions precedent to, and all consents
necessary to permit, the Purchase pursuant to the Purchase Documents have been
satisfied or delivered, or waived with the prior written consent of the Initial
Holder, and no material breach of any term or provision of any Purchase Document
has occurred and no action has been taken by any competent authority which
restrains, prevents or imposes material adverse conditions upon, or seeks to
restrain, prevent or impose material adverse conditions upon, the Purchase or
the effectiveness of this Agreement.
(ii) After giving effect to the Purchase, Opco has acquired
substantially all of the assets of AFS pursuant to the AFS Purchase Agreement,
and, to the extent the assets of MAL have been made available in accordance with
the AFS Purchase Agreement, Opco and the U.K. Subsidiary have acquired
substantially all of the assets of MAL pursuant to the MAL Purchase Agreement,
in each case in compliance with all applicable laws.
ARTICLE VI
REPORTING COVENANTS
The Issuer covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Majority Holders
shall otherwise give prior written consent thereto:
6.01. FINANCIAL STATEMENTS AND REPORTS. The Issuer shall maintain,
and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of consolidated and consolidating financial statements in
conformity with GAAP, and each of the financial statements submitted to the
Holders shall be prepared from such system and records. The Issuer shall
deliver or cause to be delivered to each Holder a copy of all financial
statements, notices, reports and other documents and certificates delivered to
any other holder of Indebtedness of the Issuer (or any agent or representative
thereof), other than Indebtedness held solely by an Affiliate of
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the Issuer and Indebtedness whose aggregate outstanding principal amount is
less than $1,000,000.
6.02. OPERATIONS REPORTS. Within seven (7) days after the Majority
Holders' request therefor, the Issuer shall deliver to the Holders a report
detailing the operations of the Issuer and its Subsidiaries which report shall
include a management commentary with respect to the Issuer's and its
Subsidiaries' financial performance during such period as may be requested by
the Majority Holders, together with an explanation of any material changes in
the consolidated and consolidating statements of income, stockholders' equity
and cash flow of the Issuer and its Subsidiaries for such period from such
statements for the corresponding period of the previous Fiscal Year and the
corresponding figures from the consolidated financial forecast for the current
Fiscal Year delivered pursuant to SECTION 6.01(f) of the Term Loan Agreement.
6.03. EVENTS OF DEFAULT. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Issuer obtaining knowledge (a) of any condition or event which
constitutes an Event of Default or Potential Event of Default, or becoming aware
that any Holder has given any notice with respect to a claimed Event of Default
or Potential Event of Default under this Agreement, (b) that any Person has
given any notice to the Issuer or any Subsidiary of the Issuer or taken any
other action with respect to a claimed default or event or condition of the type
referred to in SECTION 9.01(e), or (c) of any condition or event which has or is
reasonably likely to have a Material Adverse Effect, the Issuer shall deliver to
the Holders an Officer's Certificate specifying (A) the nature and period of
existence of any such claimed default, Event of Default, Potential Event of
Default, condition or event, (B) the notice given or action taken by such Person
in connection therewith, and (C) what action the Issuer has taken, is taking and
proposes to take with respect thereto.
6.04. LAWSUITS. (a) Promptly upon the Issuer obtaining knowledge of
the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Issuer or any
of its Subsidiaries or any Property of the Issuer or any of its Subsidiaries,
which action, suit, proceeding, governmental investigation or arbitration
exposes, or in the case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general allegations or
circumstances which expose, in the Issuer's reasonable judgment, the Issuer or
any of its Subsidiaries to liability in an amount aggregating $100,000 or more
(exclusive of claims covered by insurance policies of the Issuer or any of its
Subsidiaries unless the insurers of such claims have disclaimed coverage or
reserved the right to disclaim coverage on such claims), the Issuer shall give
written notice thereof to the Holders and provide such other information as may
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be reasonably available to enable the Holders and their respective counsel to
evaluate such matters; (b) as soon as practicable and in any event within forty-
five (45) days after the end of each fiscal quarter of the Issuer, the Issuer
shall provide a written quarterly report to the Holders covering the institution
of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration (not previously reported) against or affecting the
Issuer or any of its Subsidiaries or any Property of the Issuer or any of its
Subsidiaries not previously disclosed by the Issuer to the Holders, and shall
provide such other information at such time as may be reasonably available to
enable the Holders and its counsel to evaluate such matters (but excluding such
information at to which the Issuer in good faith has asserted or will assert a
legal privilege in objection to disclosure of the information by the Issuer in
the action, suit, proceeding, investigation or arbitration); and (c) in addition
to the requirements set forth in CLAUSES (a) and (b) of this SECTION 6.04, the
Issuer upon request of the Majority Holders shall promptly give written notice
of the status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered pursuant to CLAUSE (a) or (b) above
and provide such other information as may be reasonably available to it to
enable the Holders and their respective counsel to evaluate such matters.
6.05. OTHER INFORMATION. Promptly upon receiving a request therefor
from the Majority Holders, the Issuer shall prepare and deliver to the Holders
such other information with respect to the Issuer, any of its Subsidiaries, as
from time to time may be reasonably requested by the Majority Holders.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Issuer covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Majority Holders
shall otherwise give prior written consent:
7.01. CORPORATE EXISTENCE, ETC. The Issuer shall, and shall cause
each of its Subsidiaries to, at all times maintain its corporate existence and
preserve and keep, or cause to be preserved and kept, in full force and effect
its rights and franchises material to its businesses, except where the loss or
termination of such rights and franchises is not likely to have a Material
Adverse Effect.
7.02. CORPORATE POWERS; CONDUCT OF BUSINESS. The Issuer shall, and
shall cause each of its Subsidiaries to qualify and remain qualified to do
business in each jurisdiction in which the nature of its business requires it to
be so qualified.
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7.03. COMPLIANCE WITH LAWS, ETC. The Issuer shall, and shall cause
its Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, Property, assets or operations
of such Person, and (b) obtain as needed all Permits necessary for its
operations and maintain such Permits in good standing, except in the case where
noncompliance with either CLAUSE (a) or (b) above is not reasonably likely to
have a Material Adverse Effect.
7.04. PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. The Issuer
shall pay, and cause each of its Subsidiaries to pay, (a) all taxes, assessments
and other governmental charges imposed upon it or on any of its Property or
assets or in respect of any of its franchises, business, income or Property
before any penalty, addition to tax or interest accrues thereon, and (b) all
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by SECTION 8.03) upon any of the
Issuer's or such Subsidiary's Property or assets, prior to the time when any
penalty or fine shall be incurred with respect thereto; PROVIDED, HOWEVER, that
no such taxes, assessments and governmental charges referred to in CLAUSE (a)
above or claims referred to in CLAUSE (b) above need be paid if being contested
in good faith by appropriate proceedings diligently instituted and conducted and
if such reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor. The Issuer will not, nor
will it permit any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any Person (other than with the Issuer, Opco
or any of their respective Subsidiaries).
7.05. INSURANCE. The Issuer shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect the insurance policies and programs listed on SCHEDULE 5.02-M of the
Opco Credit Agreement or substantially similar policies and programs or other
policies and programs as are acceptable to the Majority Holders. All such
policies and programs shall be maintained with insurers acceptable to the
Majority Holders.
7.06. INSPECTION OF PROPERTY; BOOKS AND RECORDS; Discussions. The
Issuer shall permit, and cause each of its Subsidiaries to permit, any
authorized representative(s) designated by any Holder to visit and inspect any
of the Properties of the Issuer or any of its Subsidiaries, to examine, audit,
check and make copies of their respective financial and accounting records,
books, journals, orders, receipts and any correspondence and other data relating
to their respective businesses or the transactions contemplated hereby or by the
Purchase Documents (including, without limitation, in connection with
environmental compliance, hazard or liability or any Government Contract), and
to discuss their affairs, finances and accounts with their officers and
independent certified public accountants, all upon
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reasonable notice and at such reasonable times during normal business hours,
as often as may be reasonably requested. At the request of any Holder and
upon delivery to the Issuer of invoices therefor, each such visitation and
inspection shall be at the Issuer's expense. The Issuer shall keep and
maintain, and cause its Subsidiaries to keep and maintain, in all material
respects proper books of record and account in which entries in conformity
with GAAP shall be made of all dealings and transactions in relation to their
respective businesses and activities. If an Event of Default has occurred
and is continuing, the Issuer, upon the Majority Holders' request, shall turn
over copies of any such records to a representative designated by the
Majority Holders.
7.07. ERISA COMPLIANCE. The Issuer shall, and shall cause each of
its Subsidiaries and ERISA Affiliates to, establish, maintain and operate all
Plans to comply in all material respects with the provisions of ERISA, the
Internal Revenue Code, all other applicable laws, and the regulations thereunder
and the respective requirements of the governing documents for such Plans.
7.08. FOREIGN EMPLOYEE BENEFIT PLAN COMPLIANCE. The Issuer shall,
and shall cause each of its Subsidiaries and ERISA Affiliates to, establish,
maintain and operate all Foreign Employee Benefit Plans to comply in all
material respects with all laws and regulations applicable thereto and the
respective requirements of the governing documents for such Plans.
7.09. GOVERNMENT CONTRACT COMPLIANCE. The Issuer shall, and shall
cause each of its Subsidiaries to (a) maintain all Permits pertaining to
Government Contracts required to operate the Issuer's business as it is
currently conducted, including, without limitation, (i) all Facility Security
Clearance(s) and Personnel Security Clearance(s), (ii) all certifications of
products manufactured by the Issuer which are on the "Qualified Products List"
of any United States Governmental Authority, and (iii) all Export Licenses and
other similar Permits; and (b) comply in all material respects with all
Requirements of Law and Contractual Obligations pertaining to each Government
Contract.
7.10. ENVIRONMENTAL COMPLIANCE. The Issuer shall, and shall cause
each of its Subsidiaries to (a) obtain and maintain in effect all Permits
required by Environmental Law and comply with all conditions of such Permits;
(b) comply with all Environmental Law applicable to the Issuer and its
Subsidiaries; and (c) conduct its and their operations in an environmentally
responsible manner so as to minimize Releases of Contaminants and the likelihood
of violating Environmental Law, except in the case where non-compliance with any
of clause (a) or (b) or (c) above will not have or result in a Material Adverse
Effect.
7.11. MAINTENANCE OF PROPERTY. The Issuer shall, and shall cause
each of its Subsidiaries to, maintain in all material
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respects all of their respective owned and leased Property in good, safe and
insurable condition and repair, and not permit, commit or suffer any waste or
abandonment of any such Property and from time to time shall make or cause to
be made all material repairs, renewal and replacements thereof, including,
without limitation, any capital improvements which may be required; PROVIDED,
HOWEVER, that such Property may be altered or renovated in the ordinary
course of business.
ARTICLE VIII
NEGATIVE COVENANTS
The Issuer covenants and agrees that so long as any Obligations are
outstanding (other than indemnities not yet due), unless the Majority Holders
shall otherwise give prior written consent:
8.01. INDEBTEDNESS. Neither the Issuer nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations;
(ii) Indebtedness under the Term Loan Agreement and the Opco
Credit Agreement and any refinancing thereof, provided that the
aggregate outstanding amount of Indebtedness described in this clause
(ii) is not increased by the applicable refinancing;
(iii) trade payables, wages and other accrued expenses incurred
in the ordinary course of business;
(iv) the Transaction Costs;
(v) in an aggregate amount not to exceed $1,000,000 at any time,
Capital Leases and purchase money Indebtedness incurred to finance the
acquisition of fixed assets, and Indebtedness incurred to refinance
such Capital Leases and purchase money Indebtedness;
(vi) Indebtedness in respect of taxes, assessments, governmental
charges and claims for labor, materials or supplies, to the extent
that payment thereof is not required pursuant to SECTION 7.04;
(vii) Indebtedness constituting Accommodation Obligations
permitted by SECTION 8.05;
(viii) Indebtedness arising from intercompany loans from Opco to
the Issuer which, together with the amount of dividends or
distributions to the Issuer on the Capital Stock of Opco permitted
under SECTION
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8.06(ii), shall not exceed an aggregate amount of $600,000 in any Fiscal
Year, PROVIDED, that the proceeds of such intercompany loans, dividends
or distributions shall be used by the Issuer solely to pay (A) operating
expenses of the Issuer in an amount not to exceed $50,000 in any Fiscal
Year, (B) accrued interest on the "Term Loan" under (and as defined in)
the Term Loan Agreement or the Notes (including, without limitation, that
portion of the principal amount of such Term Loan or the Notes
attributable to interest which has been capitalized in accordance with
the Term Loan Agreement or this Agreement, as applicable) and (C) if and
only if all accrued interest on such Term Loan and the Notes (including,
without limitation, that portion of the principal amount of such Term
Loan or the Notes attributable to interest which has been capitalized in
accordance with the Term Loan Agreement or this Agreement, as
applicable) as of the then most recent Interest Payment Date has been
(or will be concurrently therewith) paid in full in cash, dividends or
distributions on the Preferred Stock of the Issuer;
(ix) In addition to the intercompany loans from Opco to the
Borrower permitted under SECTION 8.01(viii), Indebtedness arising from
intercompany loans from Opco to the Borrower, the proceeds of which,
together with the proceeds of dividends or distributions to the
Borrower on the Capital Stock of Opco permitted under SECTION
8.06(iv), are used to pay the outstanding Indebtedness under (A) the
Term Loan Agreement and the "Term Note" on the "Scheduled Maturity
Date" (each as defined in the Term Loan Agreement) and (B) this
Agreement and the Notes on the Scheduled Maturity Date;
(x) Indebtedness arising from intercompany loans from the Issuer
to Opco or from any of Opco's wholly-owned Subsidiaries to Opco; and
(xi) Indebtedness with respect to reasonable warranties and
indemnities made under any agreements for asset sales permitted under
SECTION 8.02.
8.02. SALES OF ASSETS. Neither the Issuer nor any of its
Subsidiaries shall sell, assign, transfer, lease, convey or otherwise dispose of
any Property, whether now owned or hereafter acquired, or any income or profits
therefrom, or enter into any agreement to do so, except:
(i) the sale of Property having an aggregate Fair Market Value
of not more than $1,000,000 in any Fiscal Year for cash consideration
not less than the Fair Market Value thereof;
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(ii) the transfer of Property from a Subsidiary of Opco to Opco;
(iii) sales of Inventory, dispositions of Equipment and
licensing of General Intangibles, in each case in the ordinary course
of business; and
(iv) any Investment permitted under SECTION 8.04.
8.03. LIENS. Neither the Issuer nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of their respective Property or assets except:
(i) Liens created by the Term Loan Documents or the Opco Loan
Documents or any refinancing or replacement thereof (provided that the
aggregate Indebtedness of the Issuer and its Subsidiaries is not
increased by the refinancing or replacement);
(ii) Customary Permitted Liens; and
(iii) purchase money Liens (including the interest of a lessor
under a Capital Lease or an Operating Lease having substantially the
same economic effect and Liens to which any Property is subject at the
time of the Issuer's or such Subsidiary's purchase thereof) securing
an amount not to exceed $1,000,000 in the aggregate at any time or
from time to time, PROVIDED, that such Liens shall not apply to any
Property of the Issuer or its Subsidiaries other than that purchased
or subject to such Capital Lease.
8.04. INVESTMENTS. Neither the Issuer nor any of its Subsidiaries
shall directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iii) contributions to and payments of benefits under any Plan
(in accordance with the terms of the Plan) permitted by this
Agreement;
(iv) Investments (in an aggregate unrecovered amount not to exceed
$1,600,000) by Opco in the U.K. Subsidiary, including, without limitation,
Opco's ownership of the Capital Stock of the U.K. Subsidiary; and
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(v) Investments arising from intercompany loans which are
permitted under SECTION 8.01(viii), 8.01(ix) or 8.01(x).
8.05. ACCOMMODATION OBLIGATIONS. Neither the Issuer nor any of its
Subsidiaries shall directly or indirectly create or become or be liable with
respect to any Accommodation Obligation, except:
(i) recourse obligations resulting from endorsement of
negotiable instruments for collection in the ordinary course of
business;
(ii) Permitted Existing Accommodation Obligations; and
(iii) Accommodation Obligations arising under the Term Loan
Documents or the Opco Loan Documents.
8.06. RESTRICTED JUNIOR PAYMENTS. Neither the Issuer nor any of its
Subsidiaries shall declare or make any Restricted Junior Payment on account of
any shares of Capital Stock which is junior in right of payment or liquidation
preference to the Preferred Stock, except for:
(i) dividends or distributions to Opco on the Capital Stock of
any of Opco's wholly-owned Subsidiaries;
(ii) for so long as no Event of Default has occurred and is
continuing, dividends or distributions to the Issuer on the Capital
Stock of Opco which, together with the amount of intercompany loans
from Opco to the Issuer permitted under SECTION 8.01(viii), shall not
exceed an aggregate amount of $600,000 in any Fiscal Year, PROVIDED,
that the proceeds of such intercompany loans, dividends or
distributions shall be used by the Issuer solely to pay (A) operating
expenses of the Issuer in an amount not to exceed $50,000 in any
Fiscal Year, (B) accrued interest on the "Term Loan" under (and as
defined in) the Term Loan Agreement or the Notes (including, without
limitation, that portion of the principal amount of such Term Loan or
the Notes attributable to interest which has been capitalized in
accordance with the Term Loan Agreement or this Agreement, as
applicable) and (C) if and only if all accrued interest on such Term
Loan and the Notes (including, without limitation, that portion of the
principal amount of such Term Loan or the Notes attributable to
interest which has been capitalized in accordance with the Term Loan
Agreement or this Agreement, as applicable) as of the then most recent
Interest Payment Date has been (or will be concurrently
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therewith) paid in full in cash, dividends or distributions on the
Preferred Stock of the Issuer;
(iii) dividends or distributions on the Preferred Stock of the
Issuer in Notes to the extent permitted by this Agreement or in cash
to the extent permitted by SECTION 8.06(ii)(C); and
(iv) in addition to the dividends and distributions to the
Borrower on the Capital Stock of Opco permitted under SECTION
8.06(ii), dividends and distributions to the Borrower on the Capital
Stock of Opco, the proceeds of which, together with the proceeds of
intercompany loans from Opco to the Borrower permitted under SECTION
8.01(ix), are used to pay the outstanding Indebtedness under (A) the
Term Loan Agreement and the "Term Note" on the "Scheduled Maturity
Date" (each as defined in the Term Loan Agreement) and (B) this
Agreement and the Notes on the Scheduled Maturity Date.
8.07. CONDUCT OF BUSINESS. Neither the Issuer nor any of its
Subsidiaries shall engage in any business other than (i) the businesses engaged
in by AFS on the date hereof and (ii) any business or activities which are
substantially similar, related or incidental thereto.
8.08. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Neither the
Issuer nor any of its Subsidiaries shall directly or indirectly enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any holder or holders of more than five percent (5%) of any class of equity
Securities of the Issuer or Opco, or with any Affiliate of the Issuer which is
not its Subsidiary, on terms that are less favorable to the Issuer or any of its
Subsidiaries, as applicable, than those that might be obtained in an arm's
length transaction at the time from Persons who are not such a holder or
Affiliate. Nothing contained in this SECTION 8.08 shall prohibit (i) any
transaction expressly permitted by SECTIONS 8.01, 8.05 or 8.06; (ii) increases
in compensation and benefits for officers and employees of the Issuer or any of
its Subsidiaries which are customary in the industry or consistent with the past
business practice of the Issuer or such Subsidiary, PROVIDED, that no Event of
Default or Potential Event of Default has occurred and is continuing; (iii)
payment of customary directors' fees and indemnities; (iv) performance of any
obligations arising under the Transaction Documents or the Shareholders
Agreement; or (v) transactions between the Issuer and Opco or Opco and any of
its Subsidiaries, PROVIDED, that no Event of Default or Potential Event of
Default results therefrom.
8.09. RESTRICTION ON FUNDAMENTAL CHANGES. Neither the Issuer nor any
of its Subsidiaries shall enter into any merger or
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consolidation, or liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or series of transactions, all or substantially all of the
Issuer's or any such Subsidiary's business or Property, whether now or
hereafter acquired, except transactions permitted under SECTION 8.02.
8.10. SALES AND LEASEBACKS. Neither the Issuer nor any of its
Subsidiaries shall become liable, directly, by assumption or by Accommodation
Obligation, with respect to any lease, whether an Operating Lease or a Capital
Lease, of any Property (whether real or personal or mixed) (i) which it or one
of its Subsidiaries sold or transferred or is to sell or transfer to any other
Person, or (ii) which it or one of its Subsidiaries intends to use for
substantially the same purposes as any other Property which has been or is to be
sold or transferred by it or one of its Subsidiaries to any other Person in
connection with such lease.
8.11. ISSUANCE OF CAPITAL STOCK. Neither the Issuer nor any of its
Subsidiaries shall issue any Capital Stock to any Person except for (i) the
Capital Stock issued by such Persons as of the date of this Agreement and
(ii) Common Stock issued by the Issuer upon conversion of shares of Preferred
Stock in accordance with the respective certificate of designation for the
Series A Preferred Stock and the Series B Preferred Stock.
8.12. CORPORATE DOCUMENTS. Neither the Issuer nor any of its
Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective Corporate Documents as in effect on the
date hereof.
8.13. FISCAL YEAR. Neither the Issuer nor any of its consolidated
Subsidiaries shall change its Fiscal Year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
ARTICLE IX
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
9.01. EVENTS OF DEFAULT. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) FAILURE TO MAKE PAYMENTS WHEN DUE. The Issuer shall fail to pay
when due any of the Obligations.
(b) BREACH OF CERTAIN COVENANTS. The Issuer shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under SECTIONS 7.01 and 7.06 or ARTICLE VIII.
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(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by the Issuer to the Initial Holder herein or in
any statement or certificate at any time given by the Issuer pursuant to this
Agreement shall be false or misleading in any material respect on the date as of
which made (or deemed made).
(d) OTHER DEFAULTS. The Issuer shall default in the performance of
or compliance with any term contained in this Agreement (other than as covered
by PARAGRAPHS (a), (b) or (c) of this SECTION 9.01), and such default or event
of default shall continue for fifteen (15) days after the Issuer has knowledge
of the default or, if earlier, receipt by the Issuer of a notice of the default
from the Majority Holders.
(e) DEFAULT AS TO OTHER INDEBTEDNESS; OPERATING LEASES; OTHER
AGREEMENTS. The Issuer or any of its Subsidiaries shall fail to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (other than
an Obligation) having a principal amount in excess of $25,000; or any breach,
default or event of default shall occur, or any other condition shall exist
under any instrument, agreement or indenture pertaining to any such
Indebtedness; or any such Indebtedness shall be otherwise declared to be due and
payable (by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by the Issuer or any of its Subsidiaries (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
or any "Event of Default" under (and as defined in) the Opco Credit Agreement or
the Term Loan Agreement has occurred and is continuing.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
(i) An involuntary case shall be commenced against the Issuer or any
of its Subsidiaries and the petition shall not be dismissed, stayed, bonded or
discharged within sixty (60) days after commencement of the case; or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of the Issuer or any of its Subsidiaries in an involuntary case, under
any applicable bankruptcy, insolvency or other similar law now or hereinafter in
effect; or any other similar relief shall be granted under any applicable
federal, state, local or foreign law; or the board of directors of the Issuer or
any of its Subsidiaries (or any committee thereof) adopts any resolution or
otherwise authorizes any action to approve any of the foregoing.
(ii) A decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian
or other officer having similar powers over the Issuer or any of its
Subsidiaries or over all or a substantial part of the Property of the Issuer or
any of its Subsidiaries shall be entered; or an interim receiver, trustee or
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other custodian of the Issuer or any of its Subsidiaries or of all or a
substantial part of the Property of the Issuer or any of its Subsidiaries shall
be appointed or a warrant of attachment, execution or similar process against
any substantial part of the Property of the Issuer or any of its Subsidiaries
shall be issued and any such event shall not be stayed, dismissed, bonded or
discharged within sixty (60) days after entry, appointment or issuance; or the
board of directors of the Issuer or any of its Subsidiaries (or any committee
thereof) adopts any resolution or otherwise authorizes any action to approve any
of the foregoing.
(g) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The Issuer
or any of its Subsidiaries of the Issuer shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
Property; or the Issuer or any of its Subsidiaries of the Issuer shall make any
assignment for the benefit of creditors or shall be unable or fail, or admit in
writing its inability, to pay its debts as such debts become due.
(h) JUDGMENTS AND ATTACHMENTS. Any money judgment (other than a
money judgment covered by insurance as to which the insurance company has
acknowledged coverage), writ or warrant of attachment, or similar process
against the Issuer or any of its Subsidiaries of the Issuer or any of their
respective assets involving in any case an amount in excess of $500,000 is
entered and shall remain undischarged, unvacated, unbonded or unstayed for a
period of sixty (60) days or in any event later than five (5) days prior to the
date of any proposed sale thereunder.
(i) DISSOLUTION. Any order, judgment or decree shall be entered
against the Issuer or any of its Subsidiaries decreeing its involuntary
dissolution or split up and such order shall remain undischarged and unstayed
for a period in excess of sixty (60) days; or the Issuer or any of its
Subsidiaries shall otherwise dissolve or cease to exist except as specifically
permitted by this Agreement.
(j) EFFECTIVENESS OF AGREEMENT AND NOTES. At any time, for any
reason, this Agreement or any of the Notes ceases to be in full force and effect
or the Issuer seeks to repudiate its obligations thereunder.
(k) TERMINATION EVENT. Any Termination Event occurs which the
Majority Holders believe could reasonably be expected to subject either the
Issuer or any ERISA Affiliate to liability in excess of $250,000.
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(l) WAIVER APPLICATION. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Majority
Holders believe that the substantial business hardship upon which the
application for the waiver is based could subject either the Issuer or any ERISA
Affiliate to liability in excess of $250,000.
(m) SUSPENSIONS, DEBARMENT. Any suspension or debarment with respect
to Government Contracts is imposed on the Issuer, any of its Subsidiaries or any
of their respective directors, officers, employees, consultants or agents.
(n) MATERIAL ADVERSE CHANGE. An event shall exist which has a
Material Adverse Effect.
An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with SECTION 10.06.
9.02. RIGHTS AND REMEDIES.
(a) ACCELERATION AND TERMINATION. Upon the occurrence of any Event
of Default described in SECTIONS 9.01(f) or 9.01(g), the unpaid principal amount
of, and any and all accrued interest on, the Obligations and all accrued fees
shall automatically become immediately due and payable, without presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of intent
to demand or accelerate and of acceleration), all of which are hereby expressly
waived by the Issuer; and upon the occurrence and during the continuance of any
other Event of Default, the Majority Holders may, by written notice to the
Issuer, declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Obligations to be, and the same shall thereupon be,
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by the Issuer.
(b) DEFAULT RATE OF INTEREST. In addition to any other remedies
available to the Holders after the occurrence of an Event of Default, the
Noteholders shall be entitled to receive interest on the Obligations at the
default rate in accordance with SECTION 2.02(c).
(c) ENFORCEMENT. The Issuer acknowledges that in the event the
Issuer fails to perform, observe or discharge any of its respective obligations
or liabilities under this Agreement or the Notes, any remedy of law may prove to
be inadequate relief to the Holders; therefore, the Issuer agrees that the
Holders shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
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ARTICLE X
MISCELLANEOUS
10.01. EXPENSES. The Issuer agrees upon demand to pay, or reimburse
each Holder for, all of such Holder's reasonable internal and external audit,
legal, appraisal, valuation, filing, document duplication and reproduction and
investigation expenses and for all other out-of-pocket costs and expenses of
every type and nature (including, without limitation, the reasonable fees,
expenses and disbursements of Sidley & Austin, counsel to the Initial Holder,
local and foreign legal counsel, auditors, accountants, appraisers, printers,
insurance and environmental advisers, and other consultants and agents) incurred
by such Holder in connection with (a) such Holder's periodic audits of the
Issuer and its Subsidiaries after the date hereof; (b) the ongoing
administration of this Agreement and the Notes, including consultation with
attorneys in connection therewith and with respect to such Holder's rights and
responsibilities under this Agreement and the Notes; (c) the protection,
collection or enforcement of any of the Obligations or any security therefor or
exercising or enforcing any other right or remedy available to such Holder under
this Agreement or the Notes; (d) the commencement, defense or intervention in
any court proceeding relating in any way to the Obligations, the Property, the
Issuer, any of its Subsidiaries, this Agreement or any of the other Transaction
Documents; (e) the response to, and preparation for, any subpoena or request for
document production with which such Holder is served or deposition or other
proceeding in which such Holder is called to testify, in each case, relating in
any way to the Obligations, the Property, the Issuer, any of its Subsidiaries,
this Agreement or any of the other Transaction Documents; (f) in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (g) in taking any other action in or with respect to any suit or
proceeding (bankruptcy or otherwise) described in CLAUSES (c) through (g) above;
and (h) any amendments, consents, waivers, assignments, restatements, or
supplements to this Agreement or any of the Notes and the preparation,
negotiation, and execution of the same. Each Holder hereby acknowledges that
such Holder shall pay its own expenses incurred in connection with the
preparation, negotiation and execution of this Agreement.
10.02. INDEMNITY. The Issuer further agrees to defend, protect,
indemnify, and hold harmless the Holders and each of its officers, directors,
employees, attorneys and agents (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in ARTICLE IV) (collectively, the "Indemnitees") from and
against any and all liabilities, obligations, losses (other than loss of
profits), damages, penalties, actions, judgments, suits, claims, costs, expenses
and
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disbursements of any kind or nature whatsoever (excluding any taxes and
including, without limitation, the fees and disbursements of counsel or
consulting firms for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall be
designated a party thereto), imposed on, incurred by, or asserted against such
Indemnitees in any manner relating to or arising out of (a) this Agreement or
the Notes, or any act, event or transaction related or attendant thereto or to
the Purchase, the issuance of the Notes, the management of the Notes, or any of
the other transactions contemplated by the Transaction Documents, or (b) any
Liabilities and Costs under Environmental Laws arising from or in connection
with the past, present or future operations of the Issuer, its Subsidiaries or
any of their respective predecessors in interest, or, the past, present or
future environmental condition of any Property, the presence of
asbestos-containing materials at any Property or the Release or threatened
Release of any Contaminant (collectively, the "Indemnified Matters"); PROVIDED,
HOWEVER, that the Issuer shall have no obligation to an Indemnitee hereunder
with respect to Indemnified Matters to the extent caused by or resulting from
the willful misconduct or gross negligence of the Indemnitee (or any other
Indemnitee whose willful misconduct or grossly negligent acts were authorized by
the Indemnitee claiming indemnification hereunder), as determined by a court of
competent jurisdiction. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Issuer shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
law, to the payment and satisfaction of all Indemnified Matters incurred by the
Indemnitees.
10.03. CHANGE IN ACCOUNTING PRINCIPLES. If any change in the
accounting principles used in the preparation of the most recent financial
statements referred to in SECTION 6.01 are hereafter required or permitted by
the rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by the
Issuer with the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of any of the
covenants, standards or terms found in ARTICLE VIII, the parties hereto agree to
enter into negotiations in order to amend such provisions so as to equitably
reflect such changes with the desired result that the criteria for evaluating
compliance with such covenants, standards and terms by the Issuer shall be the
same after such changes as if such changes had not been made; PROVIDED, HOWEVER,
that no change in GAAP that would affect the method of calculation of any of the
covenants, standards or terms shall be given effect in such calculations until
such provisions are amended, in a manner satisfactory to the Majority Holders
and the Issuer, to so reflect such change in accounting principles.
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10.04. SETOFF. In addition to any rights now or hereafter granted
under applicable law, upon the occurrence and during the continuance of any
Event of Default, each Holder is hereby authorized by the Issuer at any time or
from time to time, without notice to any Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured (but not
including trust accounts)) and any other Indebtedness at any time held or owing
by such Holder to or for the credit or the account of the Issuer against and on
account of the Obligations of the Issuer to such Holder Holders, including, but
not limited to, the Notes and all claims of any nature or description arising
out of or in connection with this Agreement, irrespective of whether or not (a)
such Holder shall have made any demand hereunder or (b) the Majority Holders
shall have declared the principal of and interest on the Notes and other amounts
due hereunder to be due and payable as permitted by ARTICLE IX and even though
such Obligations may be contingent or unmatured.
10.05. RATABLE SHARING. The Noteholders agree among themselves that
(i) with respect to all amounts received by them which are applicable to the
payment of the Obligations, equitable adjustment will be made so that, in
effect, all such amounts will be shared among them ratably in accordance with
their Pro Rata Shares, whether received by voluntary payment, by the exercise of
the right of setoff, by counterclaim or cross-action or by the enforcement of
any or all of the Obligations, (ii) if any of them shall by voluntary payment or
by the exercise of any right of counterclaim, setoff or otherwise, receive
payment of a proportion of the aggregate amount of the Obligations held by it,
which is greater than the amount which such Noteholder is entitled to receive
hereunder, the Noteholder receiving such excess payment shall purchase, without
recourse or warranty, an undivided interest and participation (which it shall be
deemed to have done simultaneously upon the receipt of such payment) in such
Obligations owed to the others so that all such recoveries with respect to such
Obligations shall be applied ratably in accordance with their Pro Rata Shares;
PROVIDED, HOWEVER, that if all or part of such excess payment received by the
purchasing party is thereafter recovered from it, those purchases shall be
rescinded and the purchase prices paid for such participations shall be returned
to such party to the extent necessary to adjust for such recovery, but without
interest except to the extent the purchasing party is required to pay interest
in connection with such recovery. The Issuer agrees that any Noteholder so
purchasing a participation from another Noteholder pursuant to this
SECTION 10.05 may, to the fullest extent permitted by law, exercise all its
rights of payment (including, subject to SECTION 10.04, the right of setoff)
with respect to such participation as fully as if such Noteholder were the
direct creditor of the Issuer in the amount of such participation.
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10.06. AMENDMENTS AND WAIVERS. Unless otherwise provided in this
Agreement, no amendment or modification of any provision of this Agreement shall
be effective without the written agreement of the Majority Holders and the
Issuer, and no termination or waiver of any provision of this Agreement, or
consent to any departure by the Issuer therefrom, shall be effective without the
written concurrence of the Majority Holders, which the Majority Holders shall
have the right to grant or withhold in their sole discretion. Notwithstanding
the foregoing, any amendment, modification, termination, waiver or consent with
respect to any of the following provisions of this Agreement shall be effective
only by a written agreement, signed by each Holder affected thereby: (a)
reduction of the principal of, rate or amount of interest on the Notes or any
fees or other amounts payable to such Holder (other than by the payment or
prepayment thereof), (b) postponement of the Scheduled Maturity Date or any
other date fixed for any payment of principal of, or interest on, the Notes or
any fees or other amounts payable to such Holder, (c) change in the definition
of Majority Holders or (d) amendment of SECTION 10.05 or this SECTION 10.06.
Any waiver or consent shall be effective only in the specific instance and
for the specific purpose for which it was given. No notice to or demand on the
Issuer in any case shall entitle the Issuer to any other or further notice or
demand in similar or other circumstances.
10.07. NOTICES. Unless otherwise specifically provided herein, any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served, telecopied, telexed or sent by courier
service or United States certified mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy or
telex or four (4) Business Days after deposit in the United States mail with
postage prepaid and properly addressed. For the purposes hereof, the addresses
of the parties hereto (until notice of a change thereof is delivered as provided
in this SECTION 10.07) shall be as follows:
(a) If to the Initial Holder, at:
General Electric Capital Corporation
190 South LaSalle Street
Suite 1200
Chicago, Illinois 60603
Attention: Douglas P. Haensel
Telecopier No. (312) 419-5992
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with copies to:
General Electric Capital Corporation
292 Longridge Road
Stamford, CT 06927
Attention: Corporate Finance Group
Department Counsel
Telecopier No. (203) 357-3047
and
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: Edward D. Eddy, III, Esq.
Telecopier No. (213) 896-6600
(b) If to any other Holder, at such notice as such Holder shall
deliver to the Issuer upon becoming a Holder under this Agreement.
(c) If to the Issuer, at:
Kaynar Holdings Inc.
800 South State College Blvd.
Fullerton, California 92634-3001
Attention: David A. Werner
Telecopier No. (714) 680-3153
with a copy to:
O'Melveny & Myers
400 South Hope Street
Los Angeles, California 90071
Attn: C. James Levin, Esq.
Telecopier No. (213) 669-6407
PROVIDED, that each Holder and the Issuer shall have the right to change any of
the above-listed addresses by properly addressed and delivered notice to the
other party.
10.08. SURVIVAL OF WARRANTIES AND AGREEMENTS. All representations
and warranties made herein and all obligations of the Issuer in respect of
taxes, indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the Notes, the issuance and repayment of the
Notes and the termination of this Agreement and shall not be limited in any way
by the passage of time or occurrence of any event and shall expressly cover time
periods when the Holders may have come into possession or control of any of the
Issuer's or its Subsidiaries' Property.
10.09. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any Holder
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Holders in the exercise of any power, right or privilege under this Agreement
or any of the Notes shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement and the Notes are
cumulative to and not exclusive of any rights or remedies otherwise available.
10.10. MARSHALLING; PAYMENTS SET ASIDE. The Holders shall be under
no obligation to marshall any assets in favor of the Issuer or any other party
or against or in payment of any or all of the Obligations. To the extent that
the Issuer makes a payment or payments to any Holder or any Holder exercises its
rights of setoff, and such payment or payments or the proceeds of such
enforcement or setoff or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all right
and remedies therefor, shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
10.11. SEVERABILITY. In case any provision in or obligation under
this Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
10.12. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, AND THE
RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
10.14. LIMITATION OF LIABILITY. No claim may be made by the Issuer
or any Holders or any other Person against the Issuer, any Holder or the
Affiliates, directors, officers, employees, attorneys or agents of any of them
for any special, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Issuer and the Holders hereby waive,
release and agree not to sue upon any such claim for any such damages, whether
or not accrued and whether or not known or suspected to exist in its favor.
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10.15. SUCCESSORS AND ASSIGNS. This Agreement and the Notes shall be
binding upon the parties hereto and their respective successors and assigns and
shall inure to the benefit of the parties hereto and the successors and
permitted assigns of the Holders. The Holders may assign all or any part of its
rights and obligations under this Agreement and the Notes to any Person upon
thirty (30) days' prior written notice to (but without the consent of) the
Issuer, it being agreed and understood that each Holder's right to assign its
interests under this Agreement and the other Notes shall be independent of any
right of assignment in favor of any Holder with respect to any other agreement,
document or instrument to which it is a party. The rights hereunder of the
Issuer, or any interest therein, may not be assigned without the written consent
of all of the Holders.
10.16. CERTAIN CONSENTS AND WAIVERS OF THE ISSUER.
(a) PERSONAL JURISDICTION. THE HOLDERS AND THE ISSUER IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY CALIFORNIA STATE COURT OR FEDERAL COURT SITTING IN LOS
ANGELES, CALIFORNIA, AND ANY COURT HAVING JURISDICTION OVER APPEALS OF MATTERS
HEARD IN SUCH COURTS, IN ANY ACTION OR PROCEEDING ARISING OUT OF, CONNECTED
WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT, WHETHER ARISING IN CONTRACT, TORT, EQUITY OR
OTHERWISE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT
OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE ISSUER
IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION AS ITS AGENT (THE "PROCESS
AGENT") FOR SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN
EVERY RESPECT. THE HOLDERS AND THE ISSUER AGREES THAT A FINAL JUDGMENT IN ANY
SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
THE ISSUER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION
OF THE COURT CONSIDERING THE DISPUTE.
(b) SERVICE OF PROCESS. THE ISSUER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE ISSUER'S NOTICE ADDRESS SPECIFIED
BELOW, SUCH SERVICE TO BECOME EFFECTIVE FIVE (5) DAYS AFTER SUCH MAILING. THE
ISSUER IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY NOTE IN ANY
JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
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PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE
MAJORITY HOLDERS TO BRING PROCEEDINGS AGAINST THE ISSUER IN THE COURTS OF ANY
OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH HOLDER AND THE ISSUER IRREVOCABLY
WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY NOTE.
10.17. COUNTERPARTS; INCONSISTENCIES. This Agreement and any
amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement and each of the Notes shall be construed to the
extent reasonable to be consistent one with the other, but to the extent that
the terms and conditions of this Agreement are actually inconsistent with the
terms and conditions of any Note, this Agreement shall govern.
10.18. CONFIDENTIALITY. Each Holder shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement and
identified as such by the Issuer in accordance with such Holder's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a bona fide offeree, transferee or participant
in connection with the contemplated transfer or participation or as required or
requested by any Governmental Authority or representative thereof or pursuant to
legal process and shall require any such offeree, transferee or participant to
agree (and require any of its offerees, transferees or participants to agree) to
comply with this SECTION 10.18. In no event shall any Holder be obligated or
required to return any materials furnished by the Issuer; PROVIDED, HOWEVER,
that each offeree shall be required to agree that if it does not become a
transferee or participant it shall return all materials furnished to it by the
Issuer in connection with this Agreement. Any and all confidentiality
agreements entered into between any Holder and the Issuer shall survive the
execution of this Agreement.
[THE FOLLOWING PAGE IS THE SIGNATURE PAGE]
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10.19. ENTIRE AGREEMENT. This Agreement, taken together with all of
the Notes, embodies the entire agreement and understanding among the parties
hereto and all prior agreements and understandings, written and oral, relating
to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
ISSUER: KAYNAR HOLDINGS INC.
By /s/ D.A. Werner
------------------------------
Name: David A. Werner
Title: Vice President
INITIAL HOLDER: GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Douglas P. Hansel
------------------------------
Name: Douglas P. Hansel
Title: Region Operation Manager
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LEASE
LEASE, made and entered into this 31st day of December, 1979, with an
effective date as of November 1, 1979, by and between THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA, a New Jersey corporation, as Lessor, and KAYNAR MFG.
DIVISION, MICRODOT MANUFACTURING INC., a Delaware corporation, as Lessee:
W I T N E S S E T H:
Lessor, for and in consideration of the rents, conditions, terms and
covenants herein specified to be paid, performed and kept by Lessee, does hereby
lease, let, and demise to said Lessee, for the term hereinafter set forth, and
Lessee does hereby lease and take from Lessor, the real estate, land, premises
and improvements thereon located at 800 S. State College Boulevard, Fullerton,
California, as described legally in Exhibit "A" attached hereto and made a part
hereof, subject to all governmental regulations applicable thereto and all
matters of public record relating thereto.
LESSEE TO HAVE AND TO HOLD the same, together with all rights, privileges
and appurtenances appertaining or belonging thereunto, for and during the term
of twenty (20) years, said term commencing on November 1, 1979 and ending on
October 31, 1999, unless sooner terminated pursuant to any provision hereof.
TERMS AND CONDITIONS
1. RENT.
Lessee covenants and agrees to pay to Lessor as annual rent for the leased
premises the sum of $271,500 in lawful money of the United States of America,
payable at such place
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as may be designated by Lessor in writing, in equal monthly installments of
$22,625 in advance on the first day of each month throughout the term hereof.
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installments.
2. RENT ADJUSTMENT.
At the end of the fifth (5th) year, tenth (10th) year and fifteenth (15th)
year of the term of this Lease, the rent specified in the preceding section
shall automatically be adjusted based upon any increase that may occur in the
Consumer Price Index for All Urban Consumers, all items, as published by the
United States Department of Labor, Bureau of Labor Statistics for the Los
Angeles-Long Beach-Anaheim Metropolitan Area ("Index"). Annual rent and monthly
rent, as set out in the preceding section, shall be adjusted in the same
percentage proportion as any increase in the Index that may occur between the
Index as last published immediately preceding the commencement date of this
Lease and the average for the Index as published for the six (6) months
immediately preceding, as the case may be, the commencement of the sixth (6th),
eleventh (11th) or sixteenth (16th) year of the term of this Lease, and Lessee
shall pay any increased rent to Lessor without demand commencing with the first
monthly installment of rent due, as the case may be, in the sixth (6th),
eleventh (11th) or sixteenth (16th) year of the term; provided, however, that
there shall be no reduction in rent at any time as a result of a downward
movement in the Index.
3. ASSIGNING AND SUBLETTING.
Lessee shall not sublet the leased premises nor any part thereof, nor
assign, transfer, nor hypothecate this
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Lessee shall have the right to assign this Lease to a corporation with which it
may merge or consolidate, to any parent or subsidiary of Lessee, or subsidiary
of Lessee's parent, or to a purchaser of substantially all of Lessee's assets if
the assignee executes an agreement required by Lessor by which the assignee
assumes Lessee's obligations hereunder. No assignment, subletting or transfer
of this Lease shall diminish, alter or prejudice the direct and primary
liability of Lessee under this Lease and the covenants thereof.
4. ADDITIONAL RENT.
This Lease is what is commonly called a "net lease", it being understood
that Lessor shall receive the rent set forth in Sections 1 and 2 free and clear
of any and all other impositions, taxes, liens, charges or expenses of any
nature whatsoever in connection with the ownership and operation of the
premises. In addition to the rent reserved by Sections 1 and 2, Lessee shall
pay to the parties respectively entitled thereto all impositions, insurance
premiums, operating charges, maintenance charges, construction costs, and any
other charges, costs and expenses which arise or may be contemplated under any
provisions of this Lease during the term hereof. All of such charges, costs and
expenses shall constitute additional rent, and upon the failure of Lessee to pay
any of such costs, charges or expenses, Lessor shall have the same rights and
remedies as otherwise provided in this Lease for the failure of Lessee to pay
rent. It is the intention of the parties hereto that this Lease shall not be
terminable for any reason by the Lessee, and that Lessee shall in no event be
entitled to any abatement of or reduction in rent payable hereunder, except as
herein expressly provided.
5. REAL PROPERTY TAXES.
Lessee agrees to pay promptly, as the same become due and
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are assessed and are, or become a lien during the term of this Lease, and Lessee
agrees to exhibit to Lessor, on demand, receipts evidencing payment of all such
taxes and assessments so payable by Lessee. All such taxes for the last year of
the term hereof shall be equitably prorated between the parties as of the last
day of the term of this Lease. It is expressly agreed, however, that Lessee
shall not be obligated to pay any income tax, profits tax, excise tax or other
similar tax or charge that may be payable by or chargeable to Lessor under any
present or future law of the United States, the State of California, or any City
or other local government authority except to the extent that Lessor can
demonstrate that such taxes are in lieu of real property taxes and are in fact
imposed upon the real estate. Nor shall Lessee be obligated to pay any
inheritance, transfer, estate, succession or other similar tax or charge that
may be payable under any present or future law of the United States or the said
State, or imposed by any political or taxing subdivision thereof. Lessee may,
in good faith and in a lawful manner, contest the propriety or legality of any
tax, assessment or claim against said premises but all costs and expense
incident to such contest shall be paid by Lessee and, in case any such tax,
assessment or claim shall be adjudicated adversely to Lessee, then Lessee shall
promptly pay and satisfy such tax, assessment or claim. In the event of any
such contest by Lessee, Lessee shall indemnify Lessor against any loss or damage
resulting therefrom and, if necessary to prevent a sale or other loss or damage
to Lessor shall pay such tax, assessment or claim under the protest or take such
other steps as may be necessary to prevent any such sale or any loss or damage
to Lessor in connection therewith.
6. UTILITIES.
Lessee shall pay all charges for public utility services rendered to or on
said demised premises during the term of this
<PAGE>
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7. CONDITION OF PREMISES.
Acceptance of possession of the herein demised premises by Lessee shall
constitute an agreement by Lessee with Lessor that the demised premises are in
good and tenantable condition and that Lessor has complied with each and every
obligation on its part to be performed relating thereto. Lessee agrees that it
will, at its own cost and expense, keep the demised premises and the
improvements thereon and appurtenances thereto and every part thereof, except as
hereinafter provided, in as good order, condition and repair as they shall be
upon the commencement of the term of this Lease, reasonable and ordinary wear
excepted, and except damage or destruction caused by condemnation proceedings,
except as hereinafter provided. In the event Lessee shall fail to make or
commence any repairs required to be made by it under the provisions of this
Lease within thirty (30) days after notice from Lessor to do so, then Lessor
may, at its option (but this provision shall not be deemed to create any
obligation upon Lessor to do so nor in any manner affect the obligation of
Lessee) enter upon said premises and repair the same, and the costs and expenses
of such repairs, with interest, shall be included in the amount of rent payable
on the next succeeding rental date.
8. COMPLIANCE WITH LAW.
Lessee covenants that, during the life of this Lease, in the use and
occupation of the leased premises and the buildings, structures, fixtures and
improvements thereon, and the sidewalks, alleys, streets and ways adjacent
thereto, Lessee will comply with all covenants, conditions and restrictions of
record and all applicable laws, ordinances and regulations of duly constituted
public authorities now or
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the use thereof, whether or not any such laws, ordinances or regulations which
may be hereafter enacted involve a change of policy on the part of the
governmental body enacting the same. Lessee agrees to hold Lessor financially
harmless (a) from the consequences of any violations of such laws, ordinances or
regulations, and (b) from all claims for damages on account of injuries, death
or property damage resulting from such violation.
Lessee further agrees that it will not permit any unlawful occupation,
business or trade to be conducted on said premises or any use to be made thereof
contrary to any such law; ordinance or regulation.
9. ALTERATIONS AND REPAIRS.
Lessee, when not in default of performance of any of its obligations
hereunder, shall have the right, during the term of this Lease from time to
time, in such manner and to such extent as Lessor may in writing approve, (which
consent shall be governed by paragraph 28 hereof) to alter or repair
improvements now or hereafter located on the leased premises. All such
alterations and repairs shall conform to the architectural and design
configuration which now exists at the premises and shall enhance rather than
impair the economic value of the improvements. Lessee shall, before commencing
any alteration, addition or repair involving an expenditure of Fifty Thousand
Dollars ($50,000) or more, if requested in writing to do so, furnish Lessor with
plans and specifications or other detailed information covering such work, and
furnish Lessor with lien and completion bonds to insure payment of the costs
thereof. All such additions, repairs and alterations shall be and remain the
property of Lessor.
Lessor specifically approves the making, at such time or times as Lessee
may elect, of any or all those repairs which Lessee may elect to make to the
leased premises which are described in
<PAGE>
-7-
waives the requirement for lien or completion bonds in connection with said
repairs.
All signs and all fixtures and equipment which have been or may be
installed, placed or attached in or about demised premises by Lessee shall
always remain the property of Lessee and, upon termination by expiration of time
or otherwise of this Lease, or at any prior time, Lessee may remove all or any
of said signs, fixtures and equipment so installed, placed or attached;
provided, however, that any damage caused to the demised premises by reason of
such removal shall be repaired and paid by Lessee. Lessor may at the
termination of this Lease, at its option, require the removal by Lessee at the
expense of Lessee of any signs, fixtures, equipment or other property installed,
placed or attached to, in or about the demised premises by Lessee. Any property
of Lessee not removed from the said premises prior to the termination of this
Lease shall at the option of Lessor be deemed abandoned by Lessee and be and
become the property of Lessor.
10. LIENS.
Lessee will not permit any mechanics', laborers' or materialmen's lien to
stand against the demised premises for any labor or material furnished to Lessee
or claimed to have been furnished to Lessee or to Lessee's agents, contractors
or sublessees, in connection with the work of repair described in Exhibit B or
work of any character performed or claimed to have been performed on said
premises at the direction or sufferance of Lessee, provided, however, that
Lessee shall have the right to contest the validity or amount of any such lien
or claimed lien on the condition that Lessee shall give to Lessor such
reasonable security as may be
<PAGE>
-8-
and one-half times the amount of such lien or claimed lien. On final
determination of the lien or claim for lien the Lessee will immediately pay any
judgment rendered with all proper costs and charges and shall have the lien
released or judgment satisfied at Lessee's own expense.
11. DAMAGE OR DESTRUCTION.
In the event the improvements on the demised premises are damaged or
destroyed, then Lessee shall repair and restore the improvements then owned by
Lessor and this lease shall continue in full force and effect and Lessee shall
commence such repair or rebuilding with reasonable diligence and shall prosecute
and complete such repair and rebuilding with reasonable diligence, provided,
however, that any delay in the completion of said repairs resulting from fire or
other casualty, strikes, shortages of material or labor, governmental laws,
rules and regulations, the elements or matters beyond the reasonable control of
Lessee shall extend the time within which Lessee may complete said repairs or
rebuilding by the period of such delay. There shall be no abatement of rental
by reason of such damage or destruction or the time required to repair or
rebuild. The net proceeds of any insurance maintained in force at the expense
of Lessee, with the proceeds thereof payable to Lessor or any encumbrancer
shall, except for any portion thereof required by any encumbrancer to pay
current installments due on any encumbrance, be made available to Lessee to be
applied to the cost and expense of repair or rebuilding the damage or
destruction insured, subject to reasonable conditions and payable on the usual
architect's. certificates, but Lessor or any encumbrancer holding said
insurance proceeds may withhold until completion and the expiration of the
period
<PAGE>
-9-
exist an amount reasonably necessary to insure completion of such repairs or
destruction. Any amount required to complete such repair or rebuilding in
excess of the insurance proceeds payable to Lessee hereunder shall be paid by
Lessee before such insurance proceeds are used. If said net proceeds of
insurance are not made available to Lessee as herein provided within thirty days
after written demand therefor served upon Lessor or any encumbrancer holding
said proceeds, Lessee may terminate this Lease and be released from its
obligation to further repair or rebuild. The preceding sentence shall not apply
to any portion of said insurance proceeds which may be withheld by Lessor or any
encumbrancer until expiration of the period within which mechanics' or
materialmen's liens may be filed as hereinbefore provided, unless and until the
said period for liens has expired and the written demand provided for herein
shall be served upon Lessor and any encumbrancer holding said insurance proceeds
or any part thereof. The option of Lessee to terminate this Lease after said
thirty day written demand may be exercised only if the funds demanded are
properly then due Lessee under the terms of this Lease.
Lessor, after the commencement of the term of this Lease, shall not be
required to make any expenditures whatsoever in connection with this Lease,
including the work of repair specified in Exhibit "B", or to make any
alterations or repairs to maintain the demised premises in any way during the
term hereof.
12. INSURANCE.
Lessee hereby agrees to indemnify and hold harmless Lessor, its
subsidiaries, directors, officers, agents and employees from and against any and
all damage, loss, liability
<PAGE>
-10-
any person or persons for damage, loss or expense due to, but not limited to,
bodily injury, including death resulting anytime therefrom, and property damage
sustained by such person or persons which arises out of, is occasioned by or in
any way attributable to the use or occupancy of the demised premises and
adjacent areas by the Lessee or otherwise, the acts or omissions of Lessee, its
agents, employees or any contractors brought onto said premises by the Lessee,
except that caused by the negligence or intentional or wilful misconduct of
Lessor or its employees, agents customers and invitees. Such loss or damage
shall include, but not be limited to, any injury or damage to Lessor's personnel
(including death resulting anytime therefrom) or premises. Lessee agrees that
the obligations assumed herein shall survive this Lease.
Lessee hereby agrees to maintain in full force and effect at all times
during the term of this Lease, at its own expense, for the protection of Lessee
and Lessor, as their interest may appear, policies of insurance issued by a
responsible carrier or carriers reasonably acceptable to Lessor which afford the
following coverages:
a) Worker's Compensation - Statutory
Employer's Liability - Not less
than $100,000
Comprehensive General - Not less than
Liability Insurance $1,000,000
including Blanket Combined Single
Contractual Liability Limit for both
Broad Form Property bodily injury
Damage, Personal Injury, and property
Completed Operations - damage
Product Liability,
Fire Damage Legal.
b) Fire and Extended Coverage, Vandalism and Malicious Mischief, and
Sprinkler Leakage insurance, to cover both Lessor and Lessee as to
their respective interests therein, for the full cost of replacement
<PAGE>
-11-
c) During the period of repairs described in Exhibit "B", Builder's
All-Risk insurance naming Lessor as an additional insured and
providing coverage in an amount not less than $1,000,000.
Lessee may, elect to have reasonable deductibles in connection with all
insurance specified above with the exception of public liability insurance.
The Lessee shall deliver to Lessor at least thirty days prior to the time
such insurance is first required to be carried by Lessee, and thereafter at
least thirty days prior to expiration of such policy, Certificates of Insurance
evidencing the above coverage with limits not less than those specified above.
Such Certificates, with the exception of Worker's Compensation, shall name
Lessor its subsidiaries, directors, agents and employees as additional insureds
and shall, with the exception of public liability insurance, expressly provide
that the interest of same therein shall not be affected by any breach by Lessee
of any policy provision for which such Certificates evidence coverage. Further,
all Certificates shall expressly provide that no less than thirty days prior
written notice shall be given Lessor in the event of material alterations to or
cancellation of the coverages evidenced by such Certificates.
If, on account of the failure of Lessee to comply with the foregoing
provisions, Lessor is adjudged a co-insurer by its insurance carrier, then any
loss or damage Lessor shall sustain by reason thereof shall be borne by Lessee
and shall be immediately paid by Lessee upon receipt of a bill thereof and
evidence of such loss.
Lessor makes no representation that the limits of liability specified to be
carried by Lessee under the terms of this Lease are adequate to protect Lessee
against Lessee's undertaking
<PAGE>
-12-
this Lease is insufficient, Lessee shall provide at its own expense, such
additional insurance as Lessee deems adequate.
Anything in the Lease to the contrary notwithstanding, Lessor and Lessee
hereby waive and release each other of and from any and all rights of recovery,
claim, action or cause of action, against each other, their agents, officers and
employees, for any loss or damage that may occur to the leased premises or the
building thereon, personal property (building contents) within the building, any
furniture, equipment, machinery, goods or supplies not covered by this Lease
which Lessee may bring or obtain upon the leased premises or any additional
improvements which Lessee may construct on the leased premises, by reason of
fire, the elements or any other cause which could be insured against under the
terms of standard fire and extended coverage insurance policies, regardless of
cause or origin, including negligence of Lessor or Lessee and their agents,
officers and employees. Because this paragraph will preclude the assignment of
any claim mentioned in it by way of subrogation (or otherwise) to an insurance
company (or any other person), each party to this Lease agrees immediately to
give to each insurance company, written notice of the terms of the mutual
waivers contained in this paragraph, and to have the insurance policies properly
endorsed, if necessary, to prevent the invalidation of the insurance coverages
by reason of the mutual waivers contained in this paragraph. Lessee and Lessor
each also waive and release the other, its agents, officers and employees, of
and from any and all rights of recovery, claim, action or cause of action for
any loss or damage insured against under any other policies of insurance carried
by Lessee or Lessor as the case may be. Lessor agrees that Lessee shall adjust
any insurance claim made under any of its policies in the event of a loss.
<PAGE>
-13-
Without limiting the generality of the foregoing, damage to or destruction of
any portion of all of the buildings, structures and fixtures upon the leased
premises by fire, the elements or any other cause whatsoever, whether or not
without fault on the part of Lessee, shall not terminate this Lease or entitle
Lessee to surrender the leased premises, or entitle Lessee to any abatement of
or reduction in rent payable by Lessee hereunder, except as specifically
provided in this Lease, or otherwise affect the respective obligations of the
parties hereto, any present or future law to the contrary notwithstanding.
14. USE.
Lessee shall have the right to use the leased premises for the purpose of
manufacture and sale of parts and equipment for the aircraft industry or the
manufacture and sale of any other products, provided such use is not injurious
to the building and does not create a public hazard or nuisance.
15. EMINENT DOMAIN.
In the event the leased premises or any part thereof shall be condemned and
taken by eminent domain, the Lease shall terminate as to the part taken, and all
and any award or compensation arising from such condemnation shall be paid and
belong to Lessor except any award for damage to fixtures and equipment of
Lessee, which latter award shall belong to Lessee, and there shall be an
abatement in rent payable after the actual taking and during the balance of the
term hereof in the proportion that the floor area of the building on the demised
premises taken bears to the total floor area of said building immediately prior
to said taking. If such condemnation or taking results in the tak-
<PAGE>
-14-
not occupied by buildings, then Lessee may by notice within ten days after
possession has been taken by the condemning authority terminate this Lease. In
the event Lessee does not terminate, then Lessee shall repair any damage to the
premises and improvements and the award shall be made available to Lessee for
such purpose in the same manner as hereinabove provided with regard to proceeds
of insurance.
16. QUIET POSSESSION.
Provided Lessee performs all its covenants, agreements, and obligations
hereunder, Lessor covenants that Lessee shall have the peaceful and quiet
enjoyment of the leased premises without let or hindrance on the part of Lessor
and that Lessor will warrant and defend Lessee in the peaceful and quiet
enjoyment of the leased premises against the lawful claims of all persons. All
obligations of Lessee under this Lease are material and of equal importance.
17. DEFAULTS.
The occurrence of any one or more of the following events shall constitute
a default and breach of this Lease by Lessee:
a) The vacating or abandonment of the Premises by Lessee.
b) The failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of five days after
<PAGE>
-15-
this Lease to be observed or performed by Lessee, other than described
in paragraph (b) above, where such failure shall continue for a period
of 30 days after written notice hereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commenced such cure
within said 30-day period and thereafter diligently prosecutes such
cure to completion.
18. REMEDIES.
In the event of any such default or breach by Lessee, Lessor may at any
time thereafter, with or without notice or demand and without limiting Lessor in
the exercise of any right or remedy which Lessor may have by reason of such
default or breach:
a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default including, but not
limited to, the cost of recovering possession of the Premises;
expenses of reletting, including necessary renovation and alteration
of the Premises, reasonable attorney's fees, and any real estate
commission actually paid; and the worth at the time of award
<PAGE>
-16-
the amount of such rental loss for the same period that Lessee proves
could be reasonably avoided. Unpaid installments of rent or other
sums shall bear interest from the date due at the rate of 10% per
annum. In the event Lessee shall have abandoned the Premises, Lessor
shall have the option of (i) retaking possession of the Premises and
recovering from Lessee the amount specified in this Section 18(a) or
(ii) proceeding under Section 18(b).
b) Maintain Lessee's right to possession in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the
premises. In such event Lessor shall be entitled to enforce all of
Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
c) In the event of any such expiration, termination or repossession, then
in addition to any other remedies available to the Lessor at law or in
equity, Lessor shall have the immediate option to terminate this Lease
and all rights of Lessee hereunder by giving written notice of such
intention to terminate. In the event that Lessor shall elect to so
terminate this Lease then Lessor may recover from Lessee:
(i) the worth at the time of award of any unpaid rent
which had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by
which the unpaid rent would have been earned after termination until the time of
award exceeds the amount of such rental loss Lessee proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award
<PAGE>
-17-
its obligations under the Lease or which in the ordinary course of things
would be likely to result therefrom, and
(v) at Lessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable
California law.
As used in subparagraphs (i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the rate of ten (10%) percent per
annum. As used in paragraph (iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one (1%) percent.
d) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the State of California.
19. ATTORNEY'S FEES.
Reasonable attorney's fees and other expenses incurred by Lessor in
enforcing any provision of this lease or in any action or proceeding in which
Lessor is successful by reason of a default by Lessee or by anyone holding under
Lessee, in complying with any requirement of this Lease shall be paid by Lessee
and shall constitute additional rent for this Lease. In the event Lessee is
successful in any action or proceeding between the parties hereto, reasonable
attorney's fees and expenses of Lessee in any such action or proceeding may be
added to the judgment therein.
20. WAIVER.
Except to the extent that Lessor may have otherwise agreed in writing, no
waiver by Lessor of any breach by Lessee of any of its obligations, agreements
or covenants hereunder shall be deemed to be a waiver of any subsequent or
continuing breach of the same or
<PAGE>
-18-
21. INSPECTION.
Lessor shall at all reasonable times during Lessee's business hours have
access to the premises for the purpose of inspection or repair.
22. HOLDING OVER.
In the event Lessee holds over after the termination of this Lease, such
holding over shall not be considered as or being a renewal of this Lease, and
such holding over shall be construed to be a tenancy from month to month only at
the same rental and under the same terms and conditions as are provided in this
Lease.
23. SUCCESSORS AND ASSIGNS.
This Lease, subject to the provisions on assignment, shall be binding upon
and inure to the benefit of the respective successors and assigns of the parties
hereto. Any transfer of this Lease, whether by Lessee or any assigns of Lessee
by operation of law or by voluntary assignment, with or without the consent of
Lessor, shall not diminish, alter or prejudice the direct and primary liability
of Lessee under this Lease and the covenants thereof.
24. ESTOPPEL CERTIFICATE.
a) Lessee shall at any time upon not less than ten (10) days prior
written notice from Lessor execute, acknowledge and deliver to Lessor
a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease as so modified, is in
full force and effect) and the date to which the rent and other
charges are paid in advance, if any, and (ii) acknowledging that there
are not, to Lessee's knowledge, any uncured defaults on the part of
Lessor hereunder, or specifying
<PAGE>
-19-
b) Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and
effect, without modification except as may be represented by Lessor,
(ii) that there are no uncured defaults in Lessor's performance, and
(iii) that not more than one month's rent has been paid in advance.
c) If Lessor desires to finance or refinance the Premises, or any part
thereof, Lessee hereby agrees to deliver to any lender designated by
Lessor such financial statements of Lessee as may be reasonably
required by such lender. Such statements shall include the past three
years' financial statements of Lessee. All such financial statements
shall be received by Lessor in confidence and shall be used only for
the purposes herein set forth.
25. LESSOR'S LIABILITY.
The term "Lessor" as used herein shall mean only the owner or owners at
the time in question of the fee title of the premises. In the event of any
transfer of such title or interest, Lessor herein named (and in case of any
subsequent transfers the then grantor) shall be relieved from and after the
date of such transfer of all liability as respects Lessor's obligation
thereafter to be performed, provided that (i) Lessor's grantee has assumed in
writing, for the benefit of Lessee, Lessor's obligations under this Lease and
said written assumption is delivered to Lessee, and (ii) any funds in the
hands of Lessor or the then grantor at the time of such transfer, in which
Lessee has an interest, shall be delivered to the grantee. The obligations
contained in this Lease to be performed by Lessor shall, subject as
aforesaid, be binding on Lessor's successors and assigns, only during their
respective
<PAGE>
-20-
TERMINATION OF LEASE
The parties to this Agreement are The Prudential Insurance Company of
America, a New Jersey corporation the (hereinafter the "Lessor") and Kaynar Mfg.
Division, Microdot Manufacturing Inc., a Delaware corporation (hereinafter the
"Lessee").
RECITALS:
A. Frank A. Klaus, as landlord, and Kaynar Mfg. Co., Inc., as tenant,
entered into a written Lease dated May 22, 1962, for the lease of certain
premises therein (hereinafter the "Premises") located at 800 S. State College
Blvd., Fullerton, California (hereinafter the "Lease").
B. Lessor succeeded to all right, title and interest in said Lease held by
Frank A. Klaus and Lessee succeeded to all right, title and interest in said
Lease held by Kaynar Mfg. Co., Inc.
C. Lessor and Lessee desire by this agreement to terminate the Lease,
subject to the conditions and provisions hereinafter contained.
D. Lessor and Lessee are simultaneously herewith entering into a new lease
of the Premises.
TERMS:
In consideration of the mutual agreements herein contained, the parties
hereby agree as follows:
1. The effective date of this agreement shall be 11:59 P.M. on October
31, 1979.
2. On the effective date of this agreement and provided that the parties
have executed and delivered simultaneously with this agreement a new lease of
the Premises for a term of 20 years commencing on November 1, 1979, the Lease
shall be fully and finally surrendered and terminated.
<PAGE>
-21-
their respective obligations arising from or connected with the provisions of
the Lease. This agreement shall fully and finally settle all demands,
charges, claims, accounts, or causes of action of any nature, including,
without limitation, both known and unknown claims and causes of action that
arose out of or in connection with the Lease, and it constitutes a mutual
release with respect to the Lease.
4. Lessee acknowledges that Lessor is not holding any money or any form of
security deposit on behalf of Lessee.
5. Each party represents that it has not made any assignment, sublease,
transfer, conveyance, or other disposition of the Lease, or interest in the
Lease, or any claim, demand, obligation, liability, action, or cause of action
arising from the Lease.
6. The parties have read this agreement and the mutual releases contained
in it, and on advice of counsel they have freely and voluntarily entered into
the agreement.
7. If either party commences an action against the other party arising out
of or in connection with this agreement, the prevailing party shall be entitled
to recover from the losing party reasonable attorneys' fees and costs of suit.
8. This agreement shall be binding on and inure to the benefit of the
parties and their successors.
9. This agreement may be executed in several counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
This agreement has been entered into by the parties as of December ,
1979.
The Prudential Insurance Company
of America
By: /s/ illegible
-----------------------------------------
Vice President
By: /s/ illegible
-----------------------------------------
Assistant Secretary
LESSOR
<PAGE>
-22-
DESCRIPTION OF REAL PROPERTY CONTAINED IN LEASE
PARCEL 1. That portion of the southwest quarter of Section 36, Township 3
south, Range 10 west, in the Rancho San Juan Cajon de Santa Ana, city of
Fullerton, county of Orange, state of California, as per map recorded in book 51
page 7 of Miscellaneous Maps, in the office of the county recorder of said
county, described as follows:
Beginning at the southwest corner of said section 36; thence north 2201.38
feet along the west line of said section to the true point of beginning;
thence north 89DEG. 37' 41" east 796.02 feet to the east line of the land
described in the deed to Anna Bordate, recorded January 22, 1949 in book
1791 page 520 of Official Records; thence south 476.92 feet to the
southeast corner of the land described in said deed to Anna Bordate; thence
north 89DEG. 46' 00" west 796.01 feet along the south line of said land of
Anna Bordate to a point on the west line of said section 36, northerly
1732.87 feet from the southwest corner of said section; thence north 468.51
feet to the true point of beginning.
Said land is shown on a map filed in book 34 page 36 of Record of Surveys, in
the office of the county recorder of said county.
PARCEL 2. That portion of the southwest quarter of section 36, Township 3
south, Range 10 west, in the Rancho San Juan Cajon de Santa Ana, city of
Fullerton, county of Orange, State of California, as per map recorded in book 51
page 7 of Miscellaneous Maps, in the office of the county recorder of said
county, described as follows:
<PAGE>
-23-
Beginning at the southwest corner of the land described as Parcel 1 in
the deed to John F. Clark and wife, recorded June 5, 1952 in book 2338
page 114 of Official Records, said point being north 0DEG. 46' 15"
west 1732.87 feet from the southwest corner of said section 36; thence
north 89DEG. 27' 45" east 796.01 feet along the southerly line of
said land to the easterly line of the land described in the deed to
Dominica Crowther, a widow, recorded October 29, 1941 in book 1118
page 207 of Official Records; thence south 0DEG. 46' 15" east along
said easterly line to the easterly prolongation of the north line of
the south half of the southeast quarter of section 35, Township 3
South, Range 10 west, as said north line is shown on a map filed in
book 29 page 17 of Record of Surveys, in the office of the county
recorder of said county; thence south 89DEG. 28' 30" west along said
easterly prolongation to the west line of said section 36; thence
north 0DEG. 46' 15" west 411.74 feet to the point of beginning.
EXCEPT the south 14.00 feet thereof.
Said land is shown on a map filed in book 34 page 36 of Record of Surveys, in
the office of the county recorder of said county.
EXHIBIT "A" page 2
<PAGE>
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
January 3, 1994, is made by and between West L.A. Properties, a California
limited partnership ("Lessor") and Kaynar Technologies, Inc. ("Lessee"),
(collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 190 West Crowther, located in the City
of Placentia, County of Orange, State of California, with zip code 92670, as
outlined on Exhibit A attached hereto ("Premises"). The "Building" is that
certain building containing the premises and generally described as (describe
briefly the nature of the Building): Concrete tilt-up building. Premises
consist of Bay C with an approximate area of 40,000 square feet. In addition to
Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee
shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7
below) as hereinafter specified, but shall not have any rights to the roof,
exterior walls or utility raceways of the Building or to any other buildings in
the Industrial Center. The Premises, the Building, the Common Areas, the land
upon which they are located, along with all other buildings and improvements
thereon, are herein collectively referred to as the "Industrial Center." (Also
see Paragraph 2.)
1.2(b) Parking: Area on Exhibit A. (Also see Paragraph 2.6.)
1.3 Term: Five years and -0- months ("Original Term") commencing January
3, 1994 ("Commencement Date") and ending December 31, 1998 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: N/A ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $15,200 per month ("Base Rent"), payable on the first day
of each month commencing February 1, 1994. (Also see Paragraph 4.)
[x] If this box is checked, this Lease provides for the Base Rent to be
adjusted per PARA 49.
1.6(a) Base Rent Paid Upon Execution: $14,219.35, as Base Rent for the
period January 3, 1994 through January 31, 1994.
<PAGE>
1.6(b) Lessee's Share of Common Area Operating Expenses: 32.9 percent
(32.9%) "Lessee's Share") as determined by [x] pro rata square footage of the
Premises as compared to the total square footage of the Building or [ ] other
criteria as described in Addendum ___.
1.7 Security Deposit: $15,200 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 Permitted Use; Warehousing, manufacturing, assembly, and related
legal uses. ("Permitted Use") (Also see Paragraph 6.)
1.9 Insuring Party, Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes): None
[Item intentionally deleted by Parties.]
1.11 Guarantor. The obligations of the Lessee under the Lease are to be
guaranteed by N/A ("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 55 and Exhibits A, all of which constitute a
part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement
Date, Lessor shall, except as otherwise provided in the Lease, promptly after
receipt of written notice
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from Lessee setting forth with specificity the nature and extent of such
non-compliance rectify same at Lessor's expense. If Lessee does not give Lessor
written notice of a non-compliance with this warranty within thirty (30) days
after the Commencement Date correction of that non-compliance shall be the
obligation of Lessee at Lessee' sole costs and expense.
2.3 Compliance with Covenants. Restrictions and Building code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinance in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges (a) that it has
been advised to satisfy itself with respect to the condition of the Premises
including but not limited to the electrical and fire sprinkler systems,
security, environmental aspects, seismic and earthquake requirements and
compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use, (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease, and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
[Item intentionally deleted by Parties.]
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces in the area referenced
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specified in Paragraph 1.2(b) on those portions of the Common Areas designated
from time to time by Lessor for parking. Lessee shall not use more parking
spaces than said number. Said parking spaces shall be used for parking by
vehicles no larger than full-size passenger automobiles or pick-up trucks,
herein called "Permitted Size Vehicles." Vehicles other than Permitted Size
vehicles shall be parked and loaded or unloaded as directed by Lessor in the
Rules and Regulations (as defined in Paragraph 40) issued by Lessor. (Also see
Paragraph 2.9).
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6 than Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicles involved and charge the reasonable cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers, invitees, during the term of this Lease, the non-exclusive right to
use, in common with others entitled to such use, the Common Areas as they exist
from time to time, subject to any rights, powers, and privileges reserved by
Lessor under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no circumstances
shall the right herein granted to use the Common Areas be deemed to include the
right to store any property, temporarily or permanently, in the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor
or Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur than Lessor shall have the
right, without notice, in addition to such other right and
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remedies that it may have, to remove the property and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.
2.9 Common Areas - Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40. Lessee agrees to abide by and conform to all such
Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not
be responsible to Lessee for the non-compliance with said rules and regulations
by other lessees of the Industrial Center.
2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time.
(a) To make changes to the Common Areas, including without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premiss remains available;
(c) To designate other land outside the boundaries of the Industrial
Center to be a part of the Common Area.
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof, and
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall
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be abated for the period of such early occupancy. All other terms of this Lease,
however, (including but not limited to the obligation to pay Lessee's Share of
Common Area Operating Expense and to carry the insurance required by
Paragraph 8) shall be in effect during such period. Any such early possession
shall not affect nor advance the Expiration Date of the Original Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 1.4 or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of the Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice in writing to Lessor within ten (10) days after
the end of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder, provided further,
however, that if such written notice of Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided and regardless of when the Original Term actually commences, if
possession is not rendered to Lessee when required by the Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States without offset or deduction, on or before the day on which it is
due under the terms of its Lease Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from to time
to time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent,
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Lessee's Share (as specified in Paragraph 1.6(b)) of all Common Area Operating
Expenses, as hereinafter defined, during each calendar year of the term of this
Lease, in accordance with the following provisions.
(a) "Common Area Operating Expenses" are defined, for purposes of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but limited to, the following;
(i) The operation, repair and maintenance, in neat, clean, good
order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directions.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service
the Common Areas.
(iii) Trash disposal, property management and security service and
the costs of any environmental inspections.
[Item intentionally deleted by Parties.]
(v) Real Property Taxes (as defined in Paragraph 10.2) to be
paid by Lessor for the Building and the Common Areas under Paragraph 10 hereof.
(vi) The costs of the premiums for the insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Area (except to the extent arising from Landlord's (or
its agent's, employee's or contractor's) negligence or wilful misconduct).
(viii) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area
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Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set forth
in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor
to either have said improvements or facilities or to provide those services
unless the Industrial Center already has the same, Lessor already provides that
services, or Lessor has agreed elsewhere in that Lease to provide the same or
some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver
to Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessor shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicted on said statement.
Lessee shall pay to Lessor the amount of the deficiency within ten (10) days
after delivery by Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall upon written request from Lessor, deposit
additional monies with Lessor as an addition to
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the Security Deposit so that the total amount of the Security Deposit shall at
all times bear the same proportion to the then current Base Rent as the initial
Security Deposit bears to the initial Base Rent set forth in Paragraph 1.5.
Lessor shall not be required to keep all or any part of the Security Deposit
separate from its general accounts. Lessor shall, at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises, return
to Lessee (or, at Lessor's option, to the assignee, if any, of Lessee's interest
herein), that portion of the Security Deposit not used or applied by Lessor.
Unless otherwise expressly agreed in writing by Lessor, no part of the Security
Deposit shall be considered to be held in trust, to bear interest or other
increment for its use, or to be prepayment for any monies to be paid by Lessee
under this Lease.
6. Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use of permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee. Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days after such request give a written notification of
same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 Hazardous Substances. See Addendum para. 51.3
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other expected to be on the Premises, is either;
(i) potentially ingenuous to the public
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health, safety or welfare, the environment, or the Premises. (ii) regulated or
monitored by any governmental authority; or (iii) a basis for potential
liability of Lessor to any governmental agency of third party under any
applicable statute or common law theory. Hazardous Substance shall include, but
not be limited to hydrocarbons, petroleum, gasoline, crude oil or any products
or by products thereof. Lessee shall not engage in any activity in or about the
Premises which constitutes a Reportable Use (as hereinafter defined) of
Hazardous Substances without the express prior written consent of Lessor and
compliance in a timely manner (at Lessee's sole cost and expense) with all
Applicable Requirements (as defined in Paragraph 6.3). "Reportable Use" shall
mean (i) the installation or use of any above or below ground storage tank,
(ii) the generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonably required to be
used by Lessee in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation to do
so) condition its consent to any Reportable Use of any Hazardous Substance by
Lessee upon Lessee's giving Lessor such additional assurance as Lessor, in its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environmental against damage, contamination or injury and/or
liability therefor, including but not limited to the installation (and, at
Lessor's option, removal on or before Lease expiration or earlier termination)
of reasonably necessary protective modifications to the Premises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof. Notwithstanding anything to the contrary herein, Lessee
may, without Lessor's consent, use Hazardous Substances as reasonably required
in the ordinary course of the business that it conducts at the Property so long
as such use does not expose the Property or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any liability
therefor and so long as such use is conducted in compliance with all laws and
regulations pertaining to Hazardous Substances. Further, Lessor's consent shall
not be required for the use of any above ground storage tanks for Hazardous
Substances if the conditions of this Lease to Lessee's use of Hazardous
Substances at the Property are met in connection therewith.
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(b) Duty to inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises of the Building, other than as previously consented to by the
Lessor or existing as of the Commencement Date, Lessee shall immediately give
Lessor written notice thereof, together with a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim,
action, or proceeding given to, or received from, any governmental authority or
private party concerning the presence, spill, release, discharge of, or exposure
to, such Hazardous Substance including but not limited to all such documents as
may be involved in any Reportable Use involving the Premises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on, under
or about the Premises (including, without limitation, through the plumbing or
sanitary sewer system).
(c) Indemnification. Except to the extent arising from Landlord's
(or its agent's, employee's or contractor's) negligence or wilful misconduct,
Lessee shall indemnify, protect, defend and hold Lessor, its agents, employees,
lenders and ground lessor, if any, and the Premises harmless from and against
any and all damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, loss of permits and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee
or by anyone under Lessee's control. Lessee's obligations under this
Paragraph 6.2(c) shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation (including consultants' and
attorneys' fees and testing), removal, remediation, restoration and/or abatement
thereof, or of any contamination therein involved and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation
or release agreement entered into by Lessor and Lessee shall release Lessee from
its obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement. It
is expressly agreed that the terms of this Section 6.2(c) apply only to
Hazardous Substances brought to the Premises by or for Lessee or by any one
under Lessee's control following the Commencement Date.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which terms is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record permits, the requirements of any applicable fire
insurance underwriter of rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene,
(ii) environmental conditions on, in,
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under or about the Premises, including soil and groundwater conditions, and
(iii) the use, generation, manufacture, production, installation, maintenance,
removal, transportation, storage, spill, or release of any Hazardous Substance),
now in effect or which may hereafter come into effect. Lessee shall, within
five (5) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including but not limited to permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply with any Applicable Requirements. See Rider page 3A
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of any emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with the Lease and all Applicable
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, Repairs, Utility installations. Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(1) Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation) and 51.3
(Remediation), Lessee shall, at Lessee's sole cost and expense and at all times,
keep the Premises and every part thereof in good order, condition and repair
(whether or not such portion of the Premises requiring repair, or the means of
repairing the same, are reasonably or
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readily accessible to Lessee, and whether or not the need for such repairs
occurs as a result of Lessee's use, any prior use, the elements or the age of
such portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities specifically serving the Premises, such
as plumbing, heating, air conditioning, ventilating, electrical lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceiling, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to
Paragraph 7.2 below. Lessee, in keeping the Premises in good order, condition
and repair, shall exercise and perform good maintenance practices. Lessee's
obligations shall include restorations, replacements or renewals when necessary
to keep the Premises and all improvements thereon or a part thereof in good
order, condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain a contract, with copies to Lessor, in customary form and substance for
and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the costs thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days after
written notice to Lessee, (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarm
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to
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paint the exterior or interior surfaces of exterior walls now shall Lessor be
obligated to maintain, repair or replace windows, doors or plate glass of the
Premises. Lessee expressly waives the benefit of any statute nor or hereafter
in effect which would otherwise afford Lessee the right to make repairs at
Lessor's expense or to terminate this Lease because of Lessor's failure to keep
the Building, Industrial Center or Common Areas in good order, condition and
repair.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions, Consent Required. The term "Utility Installations"
is used in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment, plumbing
and fencing in, on or about the Premises. The term "Trade Fixtures" shall mean
Lessee's machinery and equipment which can be removed without doing material
damage to the Premises. The term "Alterations" shall mean any modification of
the improvements on the Premises which are provided by Lessor under the terms of
this Lease other than Utility Installations or Trade Fixtures. "Lessee-Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Alterations or
Utility Installations to the interior of the Premises (excluding the roof)
without Lessor's consent but upon notice to Lessor, so long as they are not
visible from the outside of the Premises, do not involve puncturing, relocating
or removing the roof or any existing walls or changing or interfering with the
fire sprinkler or fire detection systems and the cumulative cost thereof during
the term of this Lease as extended does not exceed $40,000.
(b) Consent. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon (i) Lessee's acquiring all applicable permits
required by governmental authorities, (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon, and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
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as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $25,000 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall at its sole expense, defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor
a surety bond satisfactory to Lessor in an amount equal to one and one-half
times the amount of such contested lien claim or demand, indemnifying Lessor
against liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor may
require Lessee to pay Lessor's attorneys' fees and costs in participating in
such action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Section 12 (Rider 6A) and subject to
Lessor's right to require their removal and to cause Lessee to become the owner
thereof as hereinafter provided in this Paragraph 7.4, all Alterations and
Utility Installations made to the Premises by Lessee shall be the property of
and owned by Lessee, but considered a part of the Premises. Lessor may, at any
time and at its option, elect in writing to Lessee to be the owner of all or any
specified part of the Lessee-Owned Alterations and Utility Installations.
Unless otherwise instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Lessor and remain upon the
Premises and be surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee-Owned Alterations or Utility Installations be removed by
the expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may
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require the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease.
Except as otherwise agreed or specified herein, the Premises, as surrendered,
shall include the Alterations and Utility Installations. The obligation of
Lessee shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. Insurance; Indemnity.
8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be pro-
rated to coincide with the corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "insured contract"
for
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the performance of Lessee's indemnity obligations under this Lease. The limits
of said insurance required by this Lease or as carried by Lessee shall not,
however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be
named as an additional insured therein. Lessor may from time to time permit
Lessee to place some or all of the insurance on the property. No insurance
shall be placed by Lessee which provides for more than a $10,000 deductible.
Should Lessor do so, Lessee will furnish Lessor with certificates of insurance
which shall provide the policies may not be amended or canceled without 30 days'
prior written notice to Lessor. Lessor will reimburse Lessee for that portion
of the expense which is not attributable to Lessee under the allocations made
under the Lease. Lessor may at any time, in its discretion, assume the right to
place the insurance, or any part of it.
8.3 Property Insurance--Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force
during the term of this Lease a policy in the name of Lessor, with loss payable
to Lessor and to any Lender(s), insuring against loss or damage to the Premises.
Such insurance shall be for full replacement cost, as the same shall exist from
time to time, or the amount required by any Lender(s), but in no event more than
the commercially reasonable and available insurable value thereof if, by reason
of the unique nature or age of the improvements involved, such latter amount is
less than full replacement cost. Lessee-Owned Alterations and Utility
Installations, Trade Fixtures and Lessee's personal property shall be insured by
Lessee pursuant to Paragraph 8.4. If the coverage is available and commercially
appropriate, Lessor's policy or policies shall insure against all risks of
direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender) (it being expressly agreed that Lessee shall pay
its pro rata share of the costs of earthquake insurance only if such coverage is
required by Lender but in no event shall Lessee's pro rata share of such costs
exceed $5,000 per year) including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Building required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy or policies shall also contain an agreed
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valuation provision in lieu of any co-insurance clause, waiver of subrogation,
and inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S.
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located.
(b) Rental Value. Lessor shall also obtain and keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and any Lender(s), insuring the loss of the full rental and
other charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area Operating
Expenses and any scheduled rental increases). Said insurance may provide that
in the repairs or replacement of the Premises, to provide for one full year's
loss of rental revenues from the date of any such loss. Said insurance shall
contain an agreed valuation provision in lieu of any co-insurance clause, and
the amount of coverage shall be adjusted annually to reflect the projected
rental income, Real Property Taxes, insurance premium costs and other expenses,
if any, otherwise payable, for the next 12-month period. Common Area Operating
Expenses shall include any deductible amount in the event of such loss except
that lessee shall not be responsible for the deductible amount if the loss
resulted from Landlord's (or its agent's, employee's or contractor's) negligence
or wilful misconduct.
(c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Industrial Center if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option,
by endorsement to a policy already carried, maintain insurance coverage on all
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance
shall be full replacement cost coverage with a deductible not to exceed $1,000
per occurrence. The proceeds from any such insurance shall be used by Lessee
for the replacement of personal property and the restoration of Trade Fixtures
and Lessee-Owned Alterations and Utility Installations. Upon request from
Lessor,
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Lessee shall provide Lessor with written evidence that such insurance is in
force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholder's
Rating" of at least B-, V, or such other rating as may be required by a Lender,
as set forth in the most current issue of "Best's Insurance Guide." Lessee
shall not do or permit to be done anything which shall invalidate the insurance
policies referred to in this Paragraph 8. Lessee shall cause to be delivered to
Lessor, within seven (7) days after the earlier of the Early Possession Date or
the Commencement Date, certified copies of, or certificates evidencing the
existence and amounts of, the insurance required under Paragraph 8.2(a) and 8.4.
No such policy shall be cancelable or subject to modification except after
thirty (30) days' prior written notice to Lessor. Lessee shall at least thirty
(30) days prior to the expiration of such policies, furnish Lessor with evidence
of renewals or "insurance binders" evidencing renewal thereof, or Lessor may
order such insurance and charge the cost thereof to Lessee, which amount shall
be payable by Lessee upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereof. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence, wilful misconduct and/or
breach of express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises, Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents and/or
damages, costs, liens, judgments, penalties, loss of permits, attorneys' and
consultants' fees, expenses and/or liabilities arising out of, involving, or in
connection with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by Lessee
in the performance in a timely manner of any obligation on Lessee's part to be
performed under this Lease. The foregoing shall include, but not be limited to,
the defense or pursuit of any claim or any action or proceeding involved
therein, and whether or not (in the case of claims made against
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Lessor) litigated and/or reduced to judgment. In case any action or proceeding
be brought against Lessor by reason of any of the foregoing matters. Lessee
upon notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be so
indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other lessee of Lessor nor from the failure by Lessor to enforce the
provisions of any other lease in the Industrial Center. Notwithstanding
Lessor's negligence or breach of this Lease, Lessor shall under no circumstances
be liable for injury to Lessee's business or for any loss of income or profit
therefrom.
9. Damage or Destruction.
9.1 Definitions
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost
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(excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures
of any lessees of the Building) of the Building shall, at the option of Lessor,
be deemed to be Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage -- Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within
such ten (10) day period, and if Lessor does not so elect to restore and repair,
then this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds
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contributed by Lessee to repair any such damage or destruction. Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3
rather than Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available for
the repairs if made by either Party.
9.3 Partial Damage -- Uninsured Loss. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at
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that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by (a) exercising such option, and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten (10) days after Lessee's receipt of Lessor's written
notice purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during
such period and provides Lessor with funds (or adequate assurance thereof) to
cover any shortage in insurance proceeds. Lessor shall, at Lessor's expense,
repair such damages as soon as reasonably possible and this Lease shall continue
in full force and effect if Lessee fails to exercise such option and provide
such funds or assurance during such period, then this Lease shall terminate as
of the date set forth in the first sentence of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent and Additional Rent, including Common Area Operating
Expenses and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair of restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
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9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13). Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice in the event Lessor elects to give such notice of Lessor's intention to
termination this Lease. Lessee shall have the right within ten (10) days after
the receipt of such notice to give written notice to Lessor of Lessee's
commitment to pay for the excess costs of (a) investigation and remediation of
such Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) an amount equal to twelve (12) times the then monthly
Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with
the funds required of Lessee or satisfactory assurance thereof within thirty
(30) days following said commitment by Lessee. In such event this Lease shall
continue in full force and effect and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible after the required
funds are available. If Lessee does not give such notice and provide the
required funds or assurance thereof within the time period specified above, this
Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.8 Termination - Advanced Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
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10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real Property
Taxes" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including but not limited to a change in the ownership of the Industrial
Center or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not contemplated by
the Parties. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the calculation
of Real Property Taxes for such calendar year based upon the number of days
which such calendar year and tax year have in common. Any assessments which may
be paid in installments shall be deemed payable during the lease term only to
the extent that installments are attributable to the lease term on a pro rata
basis. Lessee shall not be responsible for any penalties which are incurred
solely by reason of the fault of the Lessor.
10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
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10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alternations and Utility
Installations, Trade Fixtures, furnishing, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's said property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
10.6 Lessee's Right to Contest Taxes. Lessee may attempt to have the
assessed valuation of the Property reduced or may initiate proceedings to
contest the real property taxes. If required by law, Lessor shall join in the
proceedings brought by Lessee. However, Lessee shall pay all costs of the
proceedings, including any costs of fees incurred by Lessor. Upon the final
determination of any proceeding or contest, Lessee shall immediately pay the
real property taxes due, together with all costs, charges, interest and
penalties incidental to the proceedings. If Lessee does not pay the real
property taxes when due and contests such taxes, Lessee shall not be in default
under this Lease for nonpayment of such taxes if Lessee bonds over such taxes or
if Lessee deposits funds with Lessor or opens an interest bearing account
reasonably acceptable to Lessor in joint names of Lessor and Lessee. The amount
of such deposit shall be sufficient to pay the real property taxes plus a
reasonable estimate of the interest, costs, charges and penalties which may
accrue if Lessee's action is unsuccessful, less any applicable tax impounds
previously paid by Lessee to Lessor. The deposit shall be applied to the real
property taxes due, as determined at such proceedings. The real property taxes
shall be paid under protest from such deposit if such payment under protest is
necessary to prevent the Property from being sold under a "tax sale" or similar
enforcement proceeding.
11. Utilities. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereof. If
any such utilities
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or services are not separately metered to the Premises or separately billed to
the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
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12. Assignment and Subletting. Notwithstanding anything to the contrary
contained in this Lease, Lessor's consent to the assignment of the Lease will
not be required in the following situations:
(a) To any corporation which controls, in controlled by or is under
common control with Lessee;
(b) To a surviving corporation in the event of a merger or
consolidation of Lessee with or into another corporation;
(c) To a corporation or other entity which purchases or otherwise
receives a transfer of all or substantially all of the assets of
Lessee of the purpose of operating them as a going business;
(d) To General Electric Capital Corporation or any future mortgagee
of the Lease consented to by the Lessor (which consent will not
be unreasonably withheld) (GECC), a creditor of Lessee, on the
following conditions:
(1) Effective upon any exercise by GECC of its right as
mortgagee of the Lease (the effective date), including,
without limitation, its taking possession of the premises,
GECC shall assume the obligations of the Lessee under the
Lease, both for obligations prior to and subsequent to the
effective date.
(2) GECC may not assign its mortgage interest or, once it has
foreclosed its mortgage, assign the Lease or sublet the
Premises without first obtaining the consent of the Lessor
in accordance with the provisions of Paragraph 12 of the
Lease.
(3) GECC shall acknowledge that Lessor and Lessee, its
successors and assigns, may negotiate for and execute
revisions of the Lease, waivers of its provisions, or
extension of its term. GECC shall agree that those changes
may be made by Lessee and the Lessor without the
participation of consent of GECC, so long as GECC has not
given Lessor written notice of its exercise of its rights as
mortgagee of the Lease and its assumption of the obligations
of lessee under the Lease.
(e) Notwithstanding the foregoing in this Section 12, in the event of
the involvement of Lessee or its
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assets in any transaction, or series of transactions (by way of
merger, sale, acquisition, financing, refinancing, transfer,
leveraged buy-out, or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets, if
which transaction or transactions will result in a reduction of
the Net Worth of Lessee, as hereinafter defined, by an amount
equal to or greater than twenty-five percent (25%) of the Net
Worth of Lessee as it exists immediately prior to such
transaction or transactions, such a transaction shall be
considered an assignment of this Lease by Lessee, to which Lessor
may reasonably withhold its consent. "Net Worth of Lessee" for
purposes of this Lease shall be the net worth of the
Lessee(excluding any guarantors) established under generally
accepted accounting principals consistently applied.
Lessor hereby specifically consents to the execution, delivery and recordation
concurrently herewith of a Leasehold Mortgage, Security Agreement, Financing
Statement and Assignment of Rents in favor of GECC with respect to Lessee's
Interest under the Lease. Lessor further acknowledges, notwithstanding anything
to the contrary contained herein, that GECC has been granted a security interest
in and to all personal property of Lessee which is or may become located at the
Premises (the "Personal Property"). Lessor shall not claim any right, lien or
security interest in or to any of such Personal Property regardless of how it
may be affixed to the Premises. Further, Lessor hereby grants to GECC the right
to enter upon the Premises for the purpose of exercising its rights with respect
to the Personal Property for a period of up to 120 days (the "Liquidation
Period") following the date GECC receives written notice that Lessee's right to
possession of the Premises has been terminated, PROVIDED, HOWEVER, (i) that GECC
shall repair any damage to the Premises resulting from the exercise by GECC of
its rights with respect to the Personal Property and (ii) GECC shall pay rent
and other charges (at the rate under the Lease) for the period that GECC is in
possession of the Premises for the purpose of exercising its remedies with
respect to Personal Property. It is further agreed that (i) the Liquidation
Period shall be extended for the number of days that GECC may be enjoined, by
operation of law or otherwise, from exercising its rights with respect to the
Personal Property, and (ii) GECC shall be entitled to extend the Liquidation
Period for an additional period of up to 60 days provided that GECC pays rent
and other charges (at the rate under the Lease) prorated on a daily basis for
such extended period.
12.1 Lessor's Consent Required.
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(a) Lessee shall not voluntarily or by operation of law, assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessees, as
hereinafter defined, by an amount equal to or greater than twenty-five percent
(25%) of such Net Worth of Lessee as it was represented to Lessor at the time of
full execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold as consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) As assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall
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be subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable under this Lease or the sublease and
without obtaining their consent, and such action shall not relieve such persons
from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the
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performance of the Lessee's obligations under this Lease, including any
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefor to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of or sublessee under this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any
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sublease of all or a portion of the Premises heretofore or hereafter made by
Lessee, and Lessor may collect such rent and income and apply same toward
Lessee's obligations under this Lease; provided, however, that until a Breach
(as defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of the foregoing provision or any other assignment
of such sublease to Lessor, nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublease for any failure of Lessee to perform
and comply with any of Lessee's obligations to such sublessee under such
Sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a Breach exists in the
performance of Lessee's obligations under this Lease, to pay to Lessor the rents
and other charges due and to become due under the sublease. Sublessee shall
rely upon any such statement and request from Lessor and shall pay such rents
and other charges to Lessor without any obligation or right to inquire as to
whether such Breach exists and notwithstanding any notice from a claim from
Lessee to the contrary, Lessee shall have no right or claim against such
sublessee, or, until the Breach has been cured, against Lessor, for any such
rents and other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposits paid by such sublessee to such sublessor or for any other prior
defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent to Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default of Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the Sublessee.
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13. Default; Breach; Remedies.
13.1 Default; Breach. A "Default" by Lessee is defined as a failure by
Lessee to observe, comply with or perform any of the terms, covenants,
conditions or rules applicable to Lessee under this Lease. A "Breach" by Lessee
is defined as the occurrence of any one or more of the following Defaults, and
where a grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable grace
period, and shall entitle Lessor to pursue the remedies set forth in Paragraph
13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses or any other monetary payment required to be made by Lessee
hereunder as and when due, when such failure continues for five (5) days after
written notice or the failure of Lessee to fulfill any obligation under this
Lease which endangers or threatens life or property, where such failure
continues for a period of five (5) days following written notice thereof by or
on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3,(ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required for its
cure, then it
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shall not be deemed to be a Breach of this Lease by Lessee if Lessee commences
such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor or any Guarantor, was materially false.
[Item intentionally deleted by Parties.]
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1) with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth at the
time of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of
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the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
the Lessee proves could have been reasonably avoided; (iii) the worth at the
time of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the Lessee
proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Lessor for all the detriment proximately caused by the Lessee's
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not limited
to the cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys fees, and that portion of any leasing commission paid by Lessor in
connection with this Lease applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision (iii) of the
immediately preceding sentence shall be computed by discounting such amount at
the discount sale rate of the Federal Reserve Bank of San Francisco or the
Federal Reserve Bank District in which the Premises are located at the time of
award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not wave Lessor's right to
recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have
the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Lessor may reserve the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and grace
period required under Subparagraph 13.1(b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be, given
to Lessee under any statute authorizing the forfeiture of leases for unlawful
detainer shall also constitute the applicable notice for grace period purposes
required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable
grace period under the unlawful detainer statute shall run concurrently after
the one such statutory notice and the failure of Lessee to cure the Default
within the greater of the two (2) such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect in
California under California Civil Code Section 1951(4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable Acts of
maintenance or preservation efforts to relet the Premises, or the appointment of
a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
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(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state whereon the Premises are
located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3. Inducement Recapture in Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as declined in Paragraph 13.1) of this Lease by Lessee any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor as additional rent due under this Lease
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4. Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent Lessor from exercising any of the other rights and remedies
granted
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hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary. Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5. Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5 a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed, provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation.
If the Premises or any portion thereof are taken under the power of
eminent domain or sold under the threat of the exercise of said power (all of
which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of the floor area of the
Premises, or more than twenty-five percent (25%) of the portion of the Common
Areas designated for Lessee's parking, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises. No reduction of Base Rent shall occur if
the condemnation does not apply to any portion of the Premises. Any award for
the taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages, provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
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terminated by reason of such condemnation, Lessor shall to the extent of its net
severance damages received, over and above Lessee's Share of the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
15. Brokers' Fees.
Each party represents to the other that it has used no broker in this
transaction.
[Items intentionally deleted by Parties.]
16. Tenancy and Financial Statements.
16.1. Tenancy Statement. Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the Amencar Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2. Financial Statement. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability.
The term "Lessor" as used herein shall mean the owner or owners at the
time in question of the fee title to the Premises. In the event of a transfer
of Lessor's title or interest in the Premises or in this Lease, Lessor shall
deliver to the transferee or assignee (in cash or by credit) any unused Security
Deposit held by Lessor at the time of such transfer or assignment. Except as
provided in Paragraph 15.3, upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as hereinabove defined.
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18. Severability.
The invalidity of any provision of this Lease, as determined by a
court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Interest on Post-Due Obligations.
Any monetary payment due Lessor hereunder, other than late charges,
not received by Lessor within ten (10) days following the date on which it was
due, shall bear interest from the date due at the prime rate charged by the
largest state chartered bank in the state in which the Premises are located plus
four percent (4%) per annum, but not exceeding the maximum rate allowed by law,
in addition to the potential late charge provided for in Paragraph 13.4.
20. Time of Essence.
Time is of the essence with respect to the performance of all
obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined.
All monetary obligations of Lessee to Lessor under the terms of this
Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer.
This Lease contains all agreements between the Parties with respect to
any matter mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective.
23. Notices.
23.1. Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours and shall be deemed sufficiently given
if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of making or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at
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such addresses as Lessor may from time to time hereafter designate by written
notice to Lessee.
23.2. Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
24. Waivers.
No waiver by Lessor of the Default or Breach of any term, covenant or
condition hereof by Lessee, shall be deemed a waiver of any other term, covenant
or condition hereof, or of any subsequent Default or Breach by Lessee of the
same or any other term, covenant or condition hereof. Lessor's consent to, or
approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording.
Either Lessor or Lessee shall, upon request of the other, execute,
acknowledge and deliver to the other a short form memorandum of this Lease for
recording purposes. The Party requesting recordation shall be responsible for
payment of any fees or taxes applicable thereto.
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26. No Right To Holdover.
Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or earlier termination of this Lease. In the
event that Lessee holds over in violation of this Paragraph 26 then the Base
Rent payable from and after the time of the expiration or earlier termination of
this Lease shall be increased to two hundred percent (200%) of the Base Rent
applicable during the month immediately preceding such expiration or earlier
termination. Nothing contained herein shall be construed as a consent by Lessor
to any holding over by Lessee.
27. Cumulative Remedies.
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
28. Covenants and Conditions.
All provisions of this Lease to be observed or performed by Lessee are
both covenants and conditions.
29. Binding Effect; Choice of Law.
This Lease shall be binding upon the Parties, the personal
representatives, successors and assigns and be governed by the laws of the State
in which the Premises are located. Any litigation between the Parties hereto
concerning this Lease shall be initiated in the county in which the Premises are
located.
30. Subordination; Attornment; Non-Disturbance.
30.1. Subordination. Lessee agrees to subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or security device (collectively
"Security Device"), now or hereafter placed by Lessor upon the real property of
which the Premises are a part, to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements and
extensions thereof, PROVIDED THAT the ground lessor or holder thereof agrees to
recognize the tenancy of Lessee pursuant to this Lease and not to disturb
Lessee's tenancy hereunder. If Lessee fails to respond to a request to
subordinate within ten (10) days after receipt of a subordination document
complying with the prior sentence then Lessor may execute said document as
Lessee's attorney-in-fact. Lessee agrees that the Lenders holding any such
Security Device shall have no duty, liability or obligation to perform any of
the obligations of Lessor under this Lease, but that in the event of Lessor's
default with respect to any such obligation, Lessee will give any Lender whose
name and address have been furnished Lessee in writing for such purpose notice
of Lessor's default pursuant
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to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2. Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3. Non-Disturbance. With respect to Security Devices now existing or
entered into by Lessor after the execution of this lease, Lessee's subordination
of this Lease shall be subject to receiving assurance (a "non-disturbance
agreement") from the Lender that Lessee's possession and this Lease, including
any options to extend the term hereof, will not be disturbed so long as Lessee
is not in Breach hereof and attorneys to the record owner of the Premises.
30.4. Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys' Fees.
If any Party brings an action or proceeding to enforce the terms
hereof or declare rights hereunder, the Prevailing Party (as hereafter defined)
in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fee
award shall not be computed in accordance with any court fee schedule, but shall
be such as to fully reimburse all attorneys' fees reasonably incurred. Lessor
shall be entitled to attorneys' fees, costs and expenses incurred in preparation
and service of
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notices of Default and consultations in connection therewith, whether or not a
legal action is subsequently commenced in connection with such Default or
resulting Breach.
32. Lessor's Access; Showing Premises; Repairs.
Lessor and Lessor's agents shall have the right to enter the Premises
at any time, in the case of an emergency, and otherwise at reasonable times for
the purposes of showing the same to prospective purchasers, lenders, or lessees,
and making alterations, repairs, improvements or additions to the Premises or to
the Building, as Lessor may reasonably deem necessary. Lessor may at any time
place on or about the Premises or Building any ordinary "For Sale" signs and
Lessor may at any time during the last one hundred eighty (180) days of the term
hereof place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to Lessee.
33. Auctions.
Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs.
Lessee shall not place any sign upon the exterior of the Premises or
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign
on the Premises by or for Lessee shall be subject to the provisions of Paragraph
7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger.
Unless specifically stated otherwise in writing by Lessor, the
voluntary or other surrender of the Lease by Lessee, the mutual termination or
cancellation hereof, or a termination hereof by Lessor for Breach by Lessee,
shall automatically
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terminate any sublease or lesser estate in the Premise; provided, however,
Lessor shall in the event of any such surrender, termination or cancellation,
have the option to construe any one or all of any existing subtenancies.
Lessor's failure within ten (10) days following any such event to make a
written election to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
[Item intentionally deleted by Parties.]
37. Quiet Possession.
Upon payment by Lessee of the rent for the Premises and the
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises
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for the entire term hereof subject to all of the provisions of this Lease.
39. Options
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is Lessee), or (iii) during the time Lessee is in Breach
of this Lease, or (iv) in the event that Lessor has given the Lessee three (3)
or more notices of separate Defaults under Paragraph 13.1 during the twelve (12)
month period immediately preceding the exercise of the Option, whether or not
the Defaults are cured
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's
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inability to exercise an Option because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for
a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their invitees.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service of other security
measures and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
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thereof as it was not legally required to pay under the provisions of this
Lease.
44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duty authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to the Lease as may be reasonably required
by an institutional insurance company or pension plan Lender in connection with
the obtaining of normal financing or refinancing of the property of which the
Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more
than one person or entity is named therein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF
ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE
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AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS
OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH
IT RELATES. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT
PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE
WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
------------------ -----------------
on: on:
--------------------------- --------------------------
By LESSOR: By LESSEE:
WEST L.A. PROPERTIES, Kaynar Technologies, Inc.
A CA Ltd. Ptshp.
By Martin H. Weil, Trustee of
The Weil Family Trust dated
10/3/84, General Partner
By: /s/ Martin H. Weil By: /s/ David A. Werner
-------------------------- -------------------------
Name Printed: Name Printed: David A. Werner
---------------- ---------------
Title: Title: Vice President
----------------------- -----------------------
By: By:
-------------------------- -------------------------
Named Printed: Named Printed:
--------------- --------------
Title: Title:
----------------------- -----------------------
Address: 233 Wilshire Blvd., Address: 800 So. State College
Suite 600 Blvd.
Santa Monica, CA 90401 Fullerton, CA 92631
Telephone: (310) 451-9871 Telephone: (714) 449-4304
Facsimile: (310) 394-4512 Facsimile: (714) 680-3153
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ADDENDUM TO LEASE DATED JANUARY 3, 1994 BETWEEN
WEST L.A. PROPERTIES, LESSOR, AND
KAYNAR TECHNOLOGIES, INC., LESSEE
This is an Addendum to the above-described Lease. Where there is a conflict
between this addendum and the printed lease, this Addendum shall prevail:
51. MICRODOT LEASE
51.1 EFFECT ON COMMENCEMENT. The premises are presently occupied by
Microdot, Inc. under the terms of a lease dated March 26, 1991 (the
"Microdot Lease"). Microdot, Inc. is in reorganization under Chapter 11 of
the Bankruptcy Act. Lessee expects to purchase Microdot's assets and
concurrently enter into this new lease with Lessor covering the Premises.
The Microdot Lease will be terminated in the bankruptcy proceedings. The
term of this lease will commence effective as of the termination of the
Microdot Lease on January 3, 1994 (such date being the "Commencement Date"
for all purposes under this Lease).
51.2 CONSIDERATION. Lessee will pay to Lessor as consideration for the
execution of this Lease the sum of $60,000 within thirty (30) days
following the actual Commencement Date hereof, less any sums received by
Lessor prior to the commencement of the term of this Lease from the
Microdot bankruptcy on account of Lessor's Proof of Claim in bankruptcy.
51.3 REMEDIATION. Prior to the Commencement Date, certain environmental
conditions which may require investigation and remediation may have arisen
with respect to the Property. Lessor contends that Microdot is responsible
for the cost of that work and has filed a claim in the Microdot bankruptcy
proceedings. Lessee will contribute funds to the cost of such work in the
following limited amounts: Lessee will pay to Lessor the sum of $25,000
per calendar quarter for a total of six quarterly payments, which shall be
payable on the first day of each calendar quarter commencing April 1, 1994.
Except for the payments provided for in this Lease, which total $150,000,
Lessee shall have no liability for any environmental conditions existing on
the commencement of the term of this lease, or any liability arising out of
the environmental conditions that were created prior to that date. Lessor
will undertake remediation of existing environmental contamination pursuant
to Applicable Requirements, and Lessee will cooperate in granting access
and making the Premises available for the necessary work, but Lessee shall
not (except for the payments required to be made to Lessor under the
provisions of this paragraph) be responsible for the investigation and
remediation work. The
50
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terms of this PARAGRAPH 51.3 shall control over any contrary provision of
this Lease.
52. WAREHOUSE LIGHTS. Upon vacating the premises by Lessee, Lessee agrees to
leave all existing lighting in place in the warehouse as is in existence in
the Premises as of the effective date of this Lease.
53. BROKER'S FEE. Lessor and Lessee both represent and warrant that they have
dealt with no broker with regard to this transaction, and agree to
Indemnify and hold each other harmless from any brokerage claims, demands
or suits that might arise out of any facts constituting a breach of such
representation and warranty.
54. RIGHT TO AUDIT. Wherever the Lease requires Lessee to pay to Lessor an
amount upon request by Lessor, Lessee shall have the right to audit and
contest such requests. Lessor shall maintain books and records in
accordance with sound accounting and management practices, reflecting such
costs, Lessee shall have the right to inspect Lessor's accounting office
upon reasonable prior notice during normal business hours during the ninety
(90) days following the furnishing by Lessor to Lessee of a request for
payment. Unless Lessee shall take written exception to any item within
said ninety (90) day period, such item shall be considered as final and
accepted by Lessee. If Lessee makes such timely written exception, a
certification as to the proper amount of any such costs shall be made by an
independent certified public accountant acceptable to both parties, which
shall be final and conclusive. Lessee agrees to pay the costs of such
certification unless it is determined that Lessor's original determination
of the aggregate of Taxes and Operating Costs was in error by more than two
(2%) percent of said amounts.
55. COUNTERPARTS. This Lease and any document or instrument executed pursuant
hereto may be executed in any number of counterparts, each of which shall
be deemed an original and all of which together shall constitute one and
the same instrument.
51
<PAGE>
RENT ADJUSTMENT(S)
ADDENDUM TO
STANDARD LEASE
Dated: January 3, 1994
By and Between (Lessor) West L.A. Properties
(Lessee) Kaynar Technologies, Inc.
Property Address: 190 West Crowther, Placentia, CA
Paragraph 49
A. RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
X 1. Cost of Living Adjustment(s) (COL)
- ---
(a) On (Fill in COL Adjustment Date(s): July 1, 1996
- --------------------------------------------------------------------------------
the monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified below, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for (select one): ___ CPIW (Urban Wage Earners and Clerical
Workers) or X CPIU (All Urban Consumers), for (Fill in Urban Area): Los
Angeles - Anaheim - Riverside. All items (1982-1984 = 100), herein referred to
as "C.P.I."
(b) The monthly rent payable in accordance with paragraph A1(a) of this
Addendum shall be calculated as follows: the Base Rent set for the in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph A1(a) above during which the adjustment is to
take effect, and the denominator of which shall be the C.P.I. of the calendar
month which is two (2) months prior to (select one): ___ the first month of the
term of this Lease as set forth in paragraph 1.3 ("Base Month") or X (Fill in
Other "Base Month": November, 1993. The sum so calculated shall constitute the
new monthly rent hereunder, but in no event shall any such new monthly rent be
less than the rent payable for the month immediately preceding the date for rent
adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department
52
<PAGE>
or bureau or agency or shall be discontinued, then the index most nearly the
same as the C.P.I. shall be used to make such calculation. In the event that
Lessor and Lessee cannot agree on such alternative index, then the matter shall
be submitted for decision to the American Arbitration Association in accordance
with the then rules of said association and the decision of the arbitrators
shall be binding upon the parties. The cost of said Arbitrators shall be paid
equally by Lessor and Lessee.
Initials: ____ Initials: ____
____ ____
53
<PAGE>
AMENDMENT TO LEASE
West L.A. Properties, a California limited partnership (Lessor) and
Kaynar Technologies, Inc. (Lessee) hereby amend the Lease between them dated
January 3, 1994, (the Lease) covering a portion of the premises commonly known
as 190 West Crowther, Placentia, California as follows:
1. TERM
The term of the Lease, now scheduled to end on December 31, 1998, is
extended to September 30, 2001. Paragraph 50 of the Lease, which granted Lessee
an option to extend the term of the Lease, is hereby deleted; Lessee has no
further option to extend.
2. RENT
Effective on October 1, 1996, the Base Rent shall be $14,000 per
month. The security deposit shall be reduced to $14,000 Lessor will apply the
$1,200 excess it now holds to the rent due on September 1, 1996. Rent shall
continue to be payable on the first day of each month. Effective on April 1,
1999, the Base Rent shall be increased in accordance with the Cost of Living
Adjustments provided for in paragraph 49, of the Lease, except that the Base
Month (the denominator in the fraction) shall be August 1996 and the Comparison
Month (the numerator in the fraction) shall be February 1999.
3. TENANT IMPROVEMENTS
Lessee proposes to make certain Tenant Improvements in accordance with
plans and specifications that Lessee will promptly prepare and submit to Lessor
for its approval, which approval will not be unreasonably withheld or delayed.
Lessee will make those improvements in a good and workmanlike manner and in
accordance with the requirements of paragraph 7.3 of the Lease. Lessor will not
require a lien and completion bond provided; (a) Lessor approves the general
contractor and its financial statement, and (b) Lessor is given an opportunity
to file and post an effective notice of non-responsibility. Those improvements
shall be subject to the provisions of paragraph 7.4 of the Lease. Upon
completion of those improvements in accordance the Lease requirements, Lessor
will lend to Lessee an amount (not to exceed $205,000) which Lessee demonstrates
by books, records and canceled checks to represent Lessee's out of pocket cost
in connection with those improvements. The loan shall be funded in increments
of not less than $50,000 prior to completion of improvements provided Lessee
gives Lessor evidence of (a) lien free completion of work of a value of not less
than the required draw; and (b) certification by the contractor that the work
remaining to be done can be completed at a cost which will not exceed the
undrawn balance of the $205,000. Total
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<PAGE>
incremental advances shall not exceed $150,000. Any remaining loan shall be
funded only after expiration of the period during which mechanic's liens can be
filed. Lessor's loan to Lessee shall be represented by Lessee's promissory note
(the Note) in the form attached as Exhibit A. The Note shall be payable in
equal installments of principal and interest over the number of full months
remaining between the date of the Note and September 30, 2001. It is a
condition precedent to Lessor's loan that Lessee not be in breach of any of is
obligations under the Lease. For this purpose, a breach is a default which
shall have extended beyond any notice and cure periods. A default in any
payment under the Note shall constitute a Breach under the provisions of
paragraph 13 of the Lease.
Dated: August 21, 1996
LESSOR: WEST L.A. PROPERTIES, A
CALIFORNIA LIMITED PARTNERSHIP
By The Weil Family Trust
dated October 3, 1984,
General Partner
By /s/ Martin H. Weil
------------------------------------------
Martin H. Weil, Trustee
LESSEE: KAYNAR TECHNOLOGIES INC.
By /s/ David A. Werner
----------------------------------------------
David A. Werner, Vice
President
55
<PAGE>
EXHIBIT A
Santa Monica, California
$_____________________________________________________________________ , 1996
In installments as hereafter stated, for value received, the undersigned
promises to pay to West L.A. Properties, or order, at Santa Monica, California,
the principal sum of $____________ , with interest from date of advance(s) on
unpaid principal at the rate of 10% per annum. This note is executed pursuant
to the provisions of a Lease (the Lease) between Maker as Lessee and Payee as
Lessor. The Lease consists of the original lease dated January 3, 1994, as
amended on _______________ , 1996.
Principal and interest shall be payable in the sum of $_____________ or more on
the first day of each month commencing on ______________ , 1996. the note will
become immediately due and payable on the first to occur of the following: (a)
any Default or Breach by the undersigned of any of its obligations under the
Lease as those obligations are defined in the Lease; or (b) September 30, 2001.
The maker(s) acknowledge(s) that late payment to payee will cause payee to incur
costs not contemplated by this loan. Such costs include, without limitation,
processing and accounting charges. Therefore, if any installment is not
received by payee when due, maker(s) will pay to payee an additional sum of 6%
of the overdue amount as a late charge. The parties agree that this late charge
represents a reasonable sum considering all the circumstances existing on the
date of this agreement and represents a fair and reasonable estimate of the
costs that payee will incur by reason of late payment. The parties further
agree that proof of actual damages would be costly or inconvenient. Acceptance
of any late charge will constitute a waiver of the default with respect to the
overdue amount and will not prevent payee from exercising any of the other
rights and remedies available to payee.
<PAGE>
Should default be made in the payment of any installment of principal or
interest when due, then the whole sum of principal and interest shall become
immediately due and payable at the option of the holder of this note. The
undersigned further promise to pay all costs of collection, including attorney's
fees incurred in the collection of this note. Principal and interest payable in
lawful money of the United States.
Kaynar Technologies Inc.
By__________________________________
<PAGE>
DATED 10 October 1995
ENFIELD VIEW PTY LTD
A.C.N. 007 382 603
Lessor
and
RECOIL PTY LTD
A.C.N. 006 664 731
Lessee
--------------------
LEASE
--------------------
Premises: 20 Stamford Road,
Oakleigh
ANDERSON RICE
SOLICITORS
LEVEL 10
555 LONSDALE STREET
MELBOURNE VIC 3000
AUSDOC DX 117
TEL: 672 2666
FAX: 642 0271
REF: TB:RAFW:914603
<PAGE>
LEASE
THIS LEASE is made the 10th day of October 1995
BETWEEN ENFIELD VIEW PTY LTD (A.C.N. 007 382 603)
of 1846 Princes Highway, Clayton in the State of Victoria
("Lessor")
AND RECOIL PTY LTD (A.C.N. 006 664 731)
of 7 Kingston Town Close, Oakleigh in the State of Victoria
("Lessee")
RECITALS
In consideration of the rent herein reserved and of the covenants and agreements
by the Lessee contained in this Lease, the Lessor on and subject to the
following covenants, terms, conditions and provisos:
A. HEREBY LEASES to the Lessee ALL THOSE premises (herein called the "Demised
Premises") more particularly described in Item 1 of the Schedule together
with the right to the Lessee, its servants, agents and invitees to use the
chattels described in Item 10 of the Schedule (if any) and for the term
described in Item 5 of the Schedule commencing on the commencement date set
out in Item 9 of the Schedule and at the rental set out in Item 3 of the
Schedule and as increased or reviewed in accordance with the provisions
hereof.
B. RESERVES to the Lessor and persons claiming through or authorized by it the
use of exterior walls the roof and right to install, maintain, use, repair,
alter and replace pipes, ducts, conduits and wires leading through the
premises and to pass and run water, air, electricity, sewerage, drainage,
gas and other services through such pipes, ducts, conduits and wires and to
enter upon the premises for such purpose provided that (except as
hereinafter provided) in exercising such rights as aforesaid the Lessor
shall not interfere with the Lessee in its use and occupation of the
Demised Premises more than is reasonably necessary.
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
In this Lease and in any Rules and Regulations made hereunder or
annexed hereto the following expressions shall have the meanings
hereinafter respectively assigned to them unless the contrary
intention appears:
"Demised Premises" -- the Demised Premises described in Item 1 of the
Schedule and shall include, where appropriate, the building erected on
the land;
"Lease" -- this Lease and any annexures and schedules relating hereto;
<PAGE>
-2-
"Lessee" -- includes the Lessee, its successors and permitted assigns
and where not repugnant to the context the servants and agents of the
Lessee;
"Lessor" -- includes the Lessor, its successors and assigns and where
not repugnant to the context its servants and agents;
"Lessor's Premises" -- the premises situated at 20 Stamford Road,
Oakleigh in the State of Victoria together with the fixtures,
fittings, furnishings, plant, machinery, equipment and Mechanical
Installations of the Lessor therein from time to time;
"Mechanical Installations" -- includes air conditioning and any other
plant, machinery or equipment for heating or cooling or circulating
air; exhaust and ventilation plant; fire alarm; fire fighting
equipment; sprinklers and any other machine, plant or equipment now or
hereafter installed at the Demised Premises;
"Outgoings" -- (to the extent to which the same are not specifically
payable from time to time by any Lessee or Licensee of any part
thereof) the total cost of all outgoings costs and expenses of the
Lessor now or hereinafter properly assessed, charged or chargeable,
paid or payable or otherwise incurred upon or in respect of the
Demised Premises and/or upon the Lessor in relation thereto or in the
conduct, management, repair and maintenance of the Demised Premises
and to the use and occupation of the same for the use described in
Item 2 of the Schedule and/or the other facilities pertaining thereto
and in particular but without limiting the generality of the
foregoing, includes:
1.1.1 all taxes payable in respect of the Lessor's Premises and/or
Demised Premises or in respect of the Lessor's ownership or
occupancy thereof but excluding income tax payable by the
Lessor on its income. The Lessee shall hereunder reimburse or
indemnify the Lessor for the Lessee's proportion of State Land
Tax or liability therefore (as the case may be) in respect of
the Lessor's Premises, calculated on the basis that such land
is the only land of which the Lessor is the owner within the
meaning of the Land Tax Act;
1.1.2 all rates, charges, assessments, duties, impositions and fees
of any public, municipal or government body, authority or
department charges, imposed or assessed on or in respect of the
Demised Premises;
1.1.3 all insurance premiums payable by the Lessor in respect of the
Demised Premises and fixtures and fittings, to the full
insurable replacement value thereof, against fire, flood,
lightning, storm and tempest, aircraft and other accident and
such other insurances including the removal of debris and other
risks as the Lessor may
<PAGE>
-3-
deem necessary or desirable in relation to the Demised Premises
or the Lessor's ownership or interest therein as set out in
Clause 2.5;
1.1.4 all charges for water (including any excess water charges),
gas, oil, electricity, light, power, fuel, telecommunications,
sewerage, garbage, pest control and other services or
requirements furnished or supplied to the Demised Premises for
the general benefit or purpose of the Demised Premises;
1.1.5 the costs of repairs, painting, maintenance and renovations of
and to the Lessor's Premises (except work of a structural
nature) unless such work arises from the use of the premises by
the Lessee; and
1.1.6 the costs including running costs, repairs and maintenance of
lighting, elevators, fire alarm, fire fighting equipment,
sprinklers and all other Mechanical Installations.
"Yearly Rent" - the amount set out in Item 3 of the Schedule and
multiplied by twelve including any alteration thereto pursuant to
Clause 2.2 and Annexure 1.
1.2 Interpretation
Words importing the singular number include the plural and the
masculine gender the feminine or neuter and vice versa and words
importing the persons include corporations and vice versa.
Any covenant or agreement on the part of two or more persons shall be
deemed to bind them jointly and severally.
Reference to a statute or ordinance includes all regulations under and
amendments to that statute or ordinance whether by subsequent statute
or otherwise and a statute or otherwise and a statute or ordinance
passed in substitution for the statute or ordinance referred to or
incorporating any of its provisions.
Headings have been inserted for guidance only and shall not be deemed
to form any part of the context of this Lease.
Where under or pursuant to this Lease or anything done hereunder, the
day on or by which any act, matter or thing is to be done is a
Saturday or a Sunday or a public holiday in the State or place in
which the Demised Premises are situated, such act, matter or thing may
be done on the next succeeding day which is not a Saturday, Sunday or
a public holiday.
References to Clauses and Schedules are to clauses of and schedules to
this Lease.
<PAGE>
-4-
2. LESSEE'S COVENANTS
THE LESSEE FOR HIMSELF AND HIS SUCCESSORS AND PERMITTED ASSIGNS AND TO
THE EXTENT THAT THE OBLIGATIONS MAY CONTINUE THROUGHOUT THE
CONTINUANCE OF THE LEASE, DOES HEREBY COVENANT WITH THE LESSOR AS
FOLLOWS:
2.1 Rent
To pay the Lessor the sum set out in Item 3 of the Schedule, as
adjusted from time to time in accordance with Clause 2.2,
monthly in advance on the first day of each month, without any
set-off (whether arising at law or in equity) and clear of all
deductions whether demanded or not and if the said commencement
date shall be other than on the first day of a month then by a
proportionate payment for any broken period calculated from the
commencement date to the first day of the month next ensuing
the commencement date or from the first day of the last month
of the term hereby created to the end of the said term as the
case may be.
2.2 Rent Review
The rent payable by the Lessee pursuant to the Lease or any
renewal or extension thereof shall be the sum or sums set out
in Item 3 of the Schedule PROVIDED THAT the rental shall be
increased, as and from the date or dates set out in Item 4 of
the Schedule hereto as a rent review date, by an amount by
which the yearly rent payable immediately prior to the review
date shall be multiplied by a fraction whereof the denominator
shall be 100 and the numerator shall be 104 and this sum shall
be the annual rent payable from the rent review date for the
twelve month period thereafter.
2.3 Rates, Taxes and Outgoings
2.3.1 To pay and bear as from the commencement date for the term
hereof, all existing and future rates (including special
parking rates and garbage collection rates whether municipal or
otherwise) taxes, assessments, charges and Outgoings (whether
parliamentary, semi-governmental or otherwise) now or hereafter
imposed or charged on the owner or occupier in respect of the
Demised Premises. If the Demised Premises are not separately
rated, taxed, assessed or charged or the Outgoings relate to an
area larger than the Demised Premises, the whole of such rates,
taxes, assessments, charges or Outgoings shall be apportioned
and the Lessee shall pay a proportion of the amount such
proportion being equal to the area that the Demised Premises
bears to the total lettable area of the property (of which the
Demised Premises form part) so rated or assessed or to which
the Outgoings relate.
<PAGE>
-5-
2.3.2 Notwithstanding anything herein contained, the Lessor may from
time to time notify the Lessee of the Lessee's proportion of
Outgoings for any period not exceeding one (1) year in advance
of the estimate, whereupon the Lessee will pay during such
period, the estimate by equal monthly installments in advance
on the days and in the manner fixed for payment of the rent,
provided that at the end of the then current year, the actual
Outgoings shall be made and any refund to or further payment by
the Lessee shall be allowed or made.
2.4 General Positive Covenants
2.4.1 Consumables
To pay all charges in respect of electric supply, gas supply or
power used on the Demised Premises and any water charges
(including any excess water charges) and telecommunications,
rentals and other charges in respect of the Demised Premises.
2.4.2 Clean the Premises
To pay the costs of maintenance and cleaning of the Demised
Premises and if the Lessee does not clean the Demised Premises
by its own staff then the Lessee shall engage for this purpose
the cleaning contractor (if any for the time being) of the
Lessor's property of which the Demised Premises form part.
2.4.3 Repair and Maintain
From time to time throughout the said term, as often as the
occasion shall require, at his own cost and expense to repair,
maintain and keep the Demised Premises (including the locks,
keys, windows, glass (internal and external) and fixtures all
sewerage fittings and pipes and all Mechanical Installations
serving the Demised Premises) in as good and substantial
repair, order and condition as the same now are with all
necessary reparations, clearings and amendments whatsoever,
when and where and as often as the same shall be requisite
during the said term provided that damage by fair wear and tear
or fire alone shall be excepted unless the Lessee and his
servants or agents invitees or charges or any of them shall
have suffered or omitted something by reason whereof the Lessor
shall be deprived of the benefit of any insurance on the
Demised Premises and provided that it shall be the
responsibility of the Lessor at the Lessor's own cost to ensure
that at all times the air conditioning plant complies with any
law from time to time applicable to refrigerants.
<PAGE>
-6-
2.4.4 Clean Windows
To regularly clean thoroughly all windows in or upon the
Demised Premises.
2.4.5 Make Good Damage
To pay for and make good all damage which may be caused to the
Demised Premises or any part thereof by reason of any gas or
water taps, electric current, appliances or fittings in the
Demised Premises being left on or open or mismanaged in any
way.
2.4.6 Repair Damage Caused to Adjoining Premises
From time to time make good any defect or damage to any
adjoining premises or other premises or any facility or
appurtenance thereof occasioned by any neglect want of care,
misuse or abuse on the part of the Lessee or the Lessee's
agents, contractors, customers, invitees or other persons
claiming through or under the Lessee or otherwise occasioned by
any breach or default of the Lessee hereunder.
2.4.7 Disposal of Rubbish
At all times during the term, store and keep all trade waste,
trash and garbage in proper receptacles kept within such space
or area in or about the Demised Premises as shall from time to
time be reasonably designated or notified by the Lessor and to
arrange for the disposal thereof and at all times refrain from
throwing or dropping from the Demised Premises or depositing or
leaving in the Demised Premises any such trade waste, trash and
garbage.
2.4.8 Notice of Defects
To give to the Lessor immediate notice in writing of any
accident or defects in the water pipes, gas pipes, electric
light appliances or fittings installed in or upon the Demised
Premises.
2.4.9 Comply with Acts
At the Lessee's own expense to comply in all respects with all
such provisions of the Health Act, Melbourne and Metropolitan
Board of Works Act and the Labour and Industry Act for the time
being in force and all present and future amendments thereof
respectively and with the provisions of all Acts of Parliament,
Regulations, Rules and By-Laws now or hereafter in force as
shall be necessitated by the business being conducted in or the
use by
<PAGE>
-7-
the Lessee of the Demised Premises and to do all acts, works,
cleansings and other things that may be necessary or ordered to
be done under any Act or Regulation or By-Law affecting
buildings of the type of the Demised Premises (and/or the
building of which the Demised Premises forms part as the case
may be) and/or public health and for the time being in force in
the said State relating to the carrying on of the business or
purpose of the Lessee upon the Demised Premises or the
employment of persons connected therewith or that may be
required by the Melbourne Water Corporation and the relevant
Municipal or Shire Authority or any Health Officer, Inspector
or other local or Public Authority but nothing herein contained
shall require the Lessee to make, provide or pay for any
structural alterations or additions to the Demised Premises
unless such structural alterations or additions are
necessitated by the nature of the business conducted or use by
the Lessee upon or of the Demised Premises or by the number or
sex of persons employed or lawfully present therein or by any
act, neglect or default of the Lessee or his agents, servants,
employees, charges, invitees or any other person claiming
through or under the Lessee.
2.4.10 Use of Premises
To use the Demised Premises in a fair and tenantable manner and
for the permitted use set out in Item 2 of the Schedule only.
2.4.11 Inspection
To allow the Lessor and his agents, architects, surveyors and
workmen, upon giving the Lessee forty-eight (48) hours notice
to have access at all reasonable times to the Demised Premises
and to all services passing through over or along the Demised
Premises, but at any time without notice in the case of
emergency, to inspect the same and every part thereof and to do
such work therein or in respect of the Demised Premises or any
part thereof as the Lessor may require to do and the Lessee
shall forthwith after receipt of notice in writing from the
Lessor properly effect any repairs, reparations and cleansings
for which the Lessee is liable hereunder PROVIDED ALWAYS that
if at any time the Lessee fails to comply with the terms of
such notice within fourteen days after service thereof the
Lessor may with or without workmen or others enter upon the
Demised Premises and do all things necessary to effect the
repairs or cleansings and any moneys expended by the Lessor for
that purpose shall be recoverable by the Lessor against the
Lessee as money paid by him at the Lessee's request by an
action at law or by distress as for rent in arrears. The Lessee
will ensure that the Lessor has been provided with and
<PAGE>
-8-
is in possession of all keys and/or entrance devices required
to gain access into the Demised Premises from time to time.
2.4.12 Maintenance and Alteration
To permit the Lessor and its architects, contractors, workmen
and others at all times on reasonable notice to enter upon the
Demised Premises and carry out repairs, improvements,
maintenance, alterations and other work (including work of a
structural nature) to the Demised Premises or to any part
thereof in compliance with the Lessor's obligations under the
provisions of this Lease or otherwise deemed necessary or
desirable by the Lessor PROVIDED ALWAYS that in the exercise of
any such power the Lessor will endeavour to avoid unduly
inconveniencing the Lessee.
2.4.13 Lessor's Costs
To pay the Lessor's reasonable costs, charges, fees and
expenses of and incidental to the preparation, completion and
execution of this Lease and all counterparts thereof and any
extension or renewal thereof and any guarantee and any other
ancillary agreements and to pay all stamp duty and registration
fees (if any) thereon.
2.4.14 Costs of Default
To pay on demand, all moneys, costs, charges and expenses which
the Lessor may incur or expend in consequence of any default in
the performance or observance of any covenant or agreement
herein contained on the part of the Lessee to be performed or
observed or under or in the exercise or enforcement or
attempted exercise or enforcement of any power or authority
herein contained or in consequence of any lawful request by the
Lessor under any covenant or condition herein contained
immediately the Lessor shall have paid, expended or incurred
the same and if such costs are legal costs these shall be
charged at the appropriate scale operating from time to time.
2.4.15 Interest on Default
To pay to the Lessor in respect of any amount due by the Lessee
to the Lessor, at the rate which is the aggregate of three per
centum (3 %) and the Indicator Lending Rate from time to time
quoted by the Lessor's banker at the relevant date for
commercial overdraft accommodation exceeding $100,000-00
calculated daily from the date upon which the same fell due for
payment until the same shall have been paid.
<PAGE>
-9-
2.4.16 Exhibit "To Let" Sign
During the last six months of the said term and at any time
during any holding over or extension thereof to permit the
Lessor or the Lessor's agents or workmen or any of them to
enter upon the Demised Premises and to exhibit and to put upon
them notices "To Let" which notices shall not be removed by the
Lessee without the written permission of the Lessor.
2.4.17 Inspection at End of Term
During the last six months of the said term and at any time
during any holding over or extension thereof to permit the
Lessor's agent and any person or persons if accompanied by the
Lessor or the Lessor's agent or with the Lessor's written
authority, upon giving the Lessee forty-eight (48) hours
notice, to inspect the Demised Premises at any time between the
hours of 9:00am and 5:00pm, but at any time without notice in
the case of emergency, and at the expiration or earlier
determination of the tenancy to give peaceable possession of
the same to the Lessor.
2.4.18 Keep Premises Open
At all times throughout the said term during normal business
hours pertaining to the said permitted use, to keep the Demised
Premises open for the permitted use referred to and not without
the consent in writing of the Lessor to leave the Demised
Premises unoccupied during the said term AND if the permitted
use or purpose referred to relates to or concerns the conduct
of a business thereon, to use his best endeavours to carry on
and conduct the said business in a proper and efficient manner
AND in the event of the said business not being so conducted or
not conducted at all or the Demised Premises being unoccupied
or unopened as the case may be the total rental for the said
term or period shall immediately become due and payable and
such sum shall be recoverable by the Lessor from the Lessee by
an action at law or by distress as for rent in arrears. This
provision is in addition to and not in derogation of any other
right or remedy available to the Lessor.
2.4.19 Locking of Property
To ensure that all doors windows and other entrances are
securely locked in the event of entering or leaving the Demised
Premises (and/or the building of which the Demised Premises
forms part as the case may be) outside the usual and normal
hours during which such doors and other entrances are kept
open.
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2.4.20 Garden
To attend to the garden (if any) of the Demised Premises and
every part thereof and to ensure that the same is attended to
regularly and in particular to ensure that the Demised Premises
is of neat appearance and free from weeds and excess growth.
2.4.21 Delivering Up
At the expiration or sooner determination of the term hereby
created quietly to deliver up to the Lessor the Demised
Premises in good and substantial repair order and condition as
the same are at the commencement of occupancy by the Lessee or
any predecessor of the Lessee pursuant to this Lease or any
other lease of which this Lease is a result due to the exercise
of an option for a further term with the glass all whole in the
windows, doors, electric light globes, fixtures and fittings in
good order and condition and in particular with the walls and
ceiling free of grease, dirt, excess paint or other material
detrimental to or detracting from the good appearance thereof
including any rubbish, damage by fair wear and tear or fire
alone excepted as aforesaid.
2.4.22 Lessee's Works
To carry out any works, repairs, alterations or additions
required to be done by the Lessee pursuant to the Lease in a
professional and workmanlike manner in accordance with the
instructions given by the Lessor's architect and to the
reasonable satisfaction of the Lessor.
2.5 Insurance
2.5.1 Insurance Charges
To pay or reimburse (as the case requires) the Lessor forthwith
on demand being made by the Lessor so as to do the cost of all
premiums, stamp duty levies and other like expenses
(hereinafter called "the premiums") in respect of such of the
policies of insurance referred to below which are already taken
out by the Lessor in respect of the Lessor's Premises of which
the Demised Premises form part as from the commencement date of
the term hereby created for the term hereof and any renewal or
extension thereof and to take out any of the policies listed
below which are not so taken out by the Lessor such policies to
be taken out by the Lessee in the names of the Lessor and the
Lessee for their respective rights and interest and in the
names of such other persons, firm or corporation as may be
designated by the Lessor including any mortgagee of the Demised
Premises, and at the
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Lessee's expenses with such insurance company as the Lessor
shall approve for the replacement value or for such other
amount as herein specified or as the Lessor shall reasonably
direct the policies taken out by the Lessee to be kept in full
force and effect during the continuance of this Lease and the
Lessee shall produce a receipt for every premium payment and
Certificates of Currency in respect of each of such policies to
the Lessor on or before the commencement date and at least
fourteen (14) days prior to the renewal date of such policies
AND in any event, the Lessee will cause the original Policies
or a true copy of each of them to be delivered to the Lessor
immediately the same are issued by the Insurance Company, the
said policies are:
(a) an insurance policy covering inter alia damage by fire
extended to include damage by explosion, storm and
tempest, riots, strikes and malicious damage,
earthquake, impact by all vehicles, aircraft, internal
water and flood for the full replacement value of all
of the Lessee's fixtures, fittings and stock contained
in the Demised Premises;
(b) an insurance policy covering inter alia damage by fire
extended to include damage by explosion, storm and
tempest, riots, strikes and malicious damage,
earthquake, impact by all vehicles, aircraft, internal
water and flood for the full replacement value of the
Demised Premises and the Lessor's fixtures and fittings
(if any) therein and further extended to include
clearance of debris and loss of rent including
Outgoings paid by Lessee;
(c) an insurance policy against breakage for the
replacement value of all plate glass now or hereafter
installed in or affixed to or forming part of the
Demised Premises;
(d) a Lessor's owner's public liability insurance policy
for a cover of at least Five Million Dollars
($5,000,000-00), or such other sum as the Lessor may
reasonably advise by notice in writing;
(e) a Lessee's/occupier's public liability insurance policy
for a cover of at least Five Million Dollars
($5,000,000-00), or such other sum as the Lessor may
reasonably advise by notice in writing; and
(f) an insurance policy against breakdown of all machinery
plant equipment or device whether mechanical electrical
or of whatsoever other nature installed in or affixed
to or forming part of the Demised Premises.
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2.5.2 Pay or Reimburse
For the purpose of this covenant the Lessee shall pay to or
reimburse (as the case requires) the Lessor the whole of the
premiums relating to any of the above insurance policies taken
out by the Lessor which relate to the Demised Premises.
2.5.3 Application of Insurance Money
In the case of any loss or damage arising from any cause
covered by the insurance as referred to in Clause 2.5.1, the
Lessee shall immediately make a claim under the relevant
insurance policy and apply and expend the moneys received by
virtue of such insurances in restoring, replacing, repairing or
reinstating the same and where such moneys shall be
insufficient for that purpose, the Lessee shall pay the balance
out of his own money.
2.5.4 Insurance against storage of Hazardous Chemicals
The Lessee shall ensure that all risks relating to the storage
or use of hazardous chemicals on Demised Premises in accordance
with Clause 2.6.8 are to be covered by the policies of
insurance referred to in Clause 2.5.1.
2.6 General Negative Covenants
2.6.1 Not to Sleep on Premises
Not to sleep or suffer anyone to sleep in or upon the Demised
Premises or use or permit the use of same or any part thereof
for residential purposes save for and in the manner permitted
by the relevant authority (if any) registering the Demised
Premises for the said permitted use.
2.6.2 No Illegal Immoral Purpose
Not to use or permit or suffer the use of the same for any
illegal, immoral or improper purpose.
2.6.3 No Rubbish
Not to allow rubbish or useless property to accumulate thereon.
2.6.4 No Alterations/Additions
Not without written consent to make, suffer or permit any
alteration or addition whatsoever to be made to any part of the
Demised Premises nor drive any nails, screws or other fixing
<PAGE>
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material into any part of the Demised Premises nor use any
adhesive material on the walls thereof.
2.6.5 Not to Vitiate Insurance
Not to do or permit to be done anything whereby the policy or
policies of insurance on the Demised Premises for the time
being subsisting may become void or voidable or whereby the
rate of premium thereon may be increased and to pay all
increased premiums and all expenses incurred by the Lessor in
the renewal of such policy or policies rendered necessary by
breach of this covenant.
2.6.6 No Noxious Offensive Business
Not to use or permit to be used the Demised Premises or any
part thereof for or carry on offensive, noxious, hazardous or
noisy business or occupation nor for the purpose or in any
manner which may be a nuisance or annoyance to the other
tenants or occupiers (if any) of the Demised Premises, the
Lessor's Premises or the adjoining occupiers or owners and not
to do or permit to be done any act or things that may be
contrary to the laws of health or the regulations or by-laws of
the Department of Health, relevant Municipal or Shire Authority
or other Authority in relation to the Demised Premises.
2.6.7 No Auction Sale
Not to conduct or permit to be conducted upon the Demised
Premises or any part thereof any auction, sale, teaching
practice or rendering of any music whatsoever or classes for
any kind of teaching or instruction whatsoever save for the
permitted use of the Demised Premises without the prior consent
in writing of the Lessor.
2.6.8 Hazardous Chemicals
Not to keep or permit to be kept or used on the Demised
Premises any chemical fluids or materials of a dangerous or
explosive nature, the keeping of which may contravene any
statute or regulation or by-law or constitute a nuisance to the
Lessor or the occupiers of neighbouring property.
2.6.9 Approved Heating
Not to use any method of heating other than that approved of by
the Lessor and then not without the prior consent in writing of
the Lessor.
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2.6.10 No Animals
Not to bring or keep or permit to be brought or kept any
animals or birds on, in or about the Demised Premises.
2.6.11 No Sweeping
Not to throw or permit to be thrown any sweeping rubbish, rags,
ashes or any other substances whether or not of the same genus
or class of the substances aforesaid out of the windows or
doors or into the water closet or closets or other water
reticulation sewerage or drainage apparatus of the Demised
Premises and/or the Lessor's Premises.
2.6.12 No Noise
Not to make or permit any of the employees, agents, charges or
invitees of the Lessee to make any improper noises in the
Demised Premises nor interfere with or annoy or permit to be
interfered with or annoyed in any way other occupiers (if any)
of the Demised Premises and/or the Lessor's Premises or any
persons having lawfully entered therein.
2.6.13 Signs
(a) Not to inscribe, paint, write or affix on or to, as the
case may be, the Demised Premises or any part thereof
or any building of which the Demised Premises form part
or any part thereof any writing, lettering, sign,
signboard, plate, name, placard, notice or neon or
other type of electric sign (all of which without
limiting their generality are hereinafter referred to
as "such signs") without first obtaining the written
approval of the Lessor, whose approval shall not be
unreasonably withheld, to its position size colour and
design and in all other respects and obtaining all
necessary permits from the relevant authorities in
respect of same.
(b) During the currency of the term hereof or any renewal
or extension thereof the Lessee shall continue to
maintain such sign in good order, repair and
appearance.
(c) Upon the expiration or earlier determination of the
term hereby created (or later upon the renewal or
extension thereof as the case may be) or earlier at the
Lessee's election the Lessee shall forthwith remove
such sign, make good any damage or loss occasioned by
such removal and reinstate and restore the Demised
Premises
<PAGE>
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and/or any building (of which the Demised Premises form
part) damaged or affected by the removal of such sign
to the same standard and condition subsisting on the
day before the Lessee commenced erecting such sign.
2.6.14 Damage to the Demised Premises
Not to do or permit to be done anything whereby the Demised
Premises or any part thereof, fair wear and tear alone
excepted, may be damaged or strained or the walls thereof
caused to sag from their right lines.
2.7 Assignment Mortgage and/or Parting with Possession
2.7.1 Provisions for Assignment, etc.
Not at any time or times to mortgage, assign, transfer, sublet,
part with possession or to give any person, firm or corporation
a licence to use or occupy the Demised Premises or any part
thereof without the consent in writing of the Lessor first had
and obtained PROVIDED THAT:
(a) the Lessor shall not withhold such consent to the
assignment of the whole of the Demised Premises if the
Lessee is not in breach of any of the covenants or
conditions herein contained and the proposed assignee
is a respectable, responsible and solvent person the
onus of proving which shall be on the Lessee;
(b) if the proposed assignee or sub-lessee should be a firm
or corporation, the Lessor may at its sole discretion
require a Guarantor of the due performance and
observance by the proposed assignee or sub-lessee of
the Lessee's covenants in this Lease, to execute such
form of guarantee and indemnity as the Lessor may
require or approve;
(c) the Lessor shall be entitled to refuse or withhold
consent to the assigning of part or to the sub-letting
of the Demised Premises and in respect of this further
proviso Section 144 of the Property Law Act 1958 is
hereby negatived;
(d) the Lessor shall in no way be liable or responsible for
any alterations or modifications to the Demised
Premises which may be necessary or required by relevant
authorities in the event of the Lessee sub-letting the
<PAGE>
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Demised Premises the whole of which burden shall lie
with the Lessee;
(e) the Lessee shall procure the execution by such person
of an assignment of this Lease to which the Lessor
shall be a party in such form as the Lessor and/or his
solicitors shall approve of and in which shall be
repeated by such assignee with the Lessor the several
conditions, covenants, agreements, stipulations and
powers herein expressed or such of the said covenants,
agreements, stipulations and powers herein expressed or
such of the said covenants, agreements, stipulations
and powers as may be required by the Lessor and/or his
solicitors such assignment to be perused by the Lessor
and/or his solicitors at the cost and expense in all
respects of the person requiring such consent and an
executed copy of such assignment duly stamped shall be
delivered to the Lessor;
(f) the Lessee shall also pay to the Lessor all reasonable
costs, charges and expenses incurred by the Lessor of
and incidental to the perusal of the assignment and
enquiries in relation to the respectability,
responsibility and solvency of the proposed assignee;
(g) the liability of the Lessee under this Lease shall not
be released by such assignment and the Lessee shall
provide to the Lessor, a guarantee and indemnity in the
form required by the Lessor guaranteeing performance by
the assignee of the obligations under this term or any
further term of this Lease renewed pursuant to an
option for renewal contained herein or provided for
herein.
2.7.2 Lessee Corporation
If the Lessee is a duly incorporated company and if at any time
hereafter the majority of the shares therein cease to be held
beneficially and according to the Share Register (except as a
result of transfers by inheritance) by the person or persons
who held such majority at the date of execution of this Lease
then -
(a) the Lessee shall immediately notify the Lessor of such
changes in shareholdings;
(b) such change of shareholdings shall be deemed to
constitute an assignment of this Lease and the
provisions of Clause 2.7.1 shall apply; and
<PAGE>
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(c) this provision shall not apply wherever the Lessee is a
company the voting shares of which are listed on a
recognised Stock Exchange in Australia or if at least
80% of its voting shares are owned by another company
the voting shares of which are so listed.
3. LESSOR'S COVENANTS
THE LESSOR DOES HEREBY COVENANT WITH THE LESSEE AS FOLLOWS:
3.1 Quiet Enjoyment
That the Lessee paying the rent hereby reserved on days and times and
in the manner hereinbefore mentioned and observing and performing the
several covenants, conditions and stipulations hereinbefore contained
and on the part of the Lessee to be observed and performed shall and
may peaceably and quietly hold and enjoy the premises hereby demised
during the term hereby granted without any disturbance, eviction or
interruption by the Lessor or any person claiming through or under
him.
3.2 Comply With Terms
To comply with the terms or conditions on the part of the Lessor to be
observed, if any, set out herein.
3.3 Structural Maintenance and Repair
3.3.1 The Lessor shall maintain the Demised Premises and the
building except for the Mechanical Installations in sound
structural condition and shall at all times be responsible
for the structural work of any nature to the Demised
Premises and keep the Demised Premises in a good structural
state of repair and free from the ingress of water.
3.3.2 The Lessor shall not be responsible for any structural work of
any nature pursuant to Clause 3.3.1 where the necessity for
such structural work has resulted from an act, neglect or
default on the part of the Lessee its agent, servant, employee,
charge, invitee or any person claiming through or under the
Lessee or has resulted from the use of the Demised Premises
specified in Item 2 of the Schedule by the Lessee.
3.4 Refrigerants
Notwithstanding anything in Clause 3.3, the Lessor shall ensure that
the air conditioning plant at all times complies with any law from
time to time applicable to refrigerants.
<PAGE>
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4. MUTUAL COVENANTS
THE LESSOR AND LESSEE MUTUALLY COVENANT AND AGREE AS FOLLOWS:
4.1 Default
Any one of the following events shall constitute a default pursuant to
the Lease:
4.1.1 if the said rent hereby reserved or any part thereof shall be
in arrears and unpaid for fourteen (14) days after the same
shall have become due (whether any formal demand therefor shall
have been made or not);
4.1.2 if the Lessee shall at any time make default in or neglect or
fail to perform or observe or fulfil any of the covenants,
agreements, conditions or stipulations herein contained or
implied and which on the part of the Lessee are or ought to be
performed, observed or fulfilled;
4.1.3 if any order or resolution shall be made for the winding up of
the Lessee or any permitted assign of the Lessee being a
company (otherwise than for the purpose of amalgamation or
reconstruction) or the Lessee be placed in official management;
4.1.4 if any assignment shall be made of the property of the Lessee
for the benefit of his Creditors;
4.1.5 if the said term or the interest of the Lessee in the Demised
Premises shall be attached or taken in execution or upon any
legal process;
4.1.6 if the Lessee or any assign being an individual shall commit an
act of bankruptcy or enter into any arrangement pursuant to
Part X of the Bankruptcy Act (Commonwealth); or
4.1.7 if a Receiver and Manager of the undertaking of the Lessee is
appointed.
If any one of the above events shall occur then it shall be lawful for
the Lessor or any person authorized by him in that behalf in the case
of a breach by the Lessee of any covenant, agreement condition or
stipulation to which Section 146 of the Property Law Act 1958 does not
extend (and although advantage may not have been taken of a previous
default of the like nature) at any time thereafter to re-enter upon
the Demised Premises or any part thereof in the name of the whole.
Upon such entry this Lease shall absolutely determine but without
prejudice to the right of action of
<PAGE>
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the Lessor in respect of any antecedent breach of the Lessee's
covenants, agreements, conditions or stipulations herein contained or
implied and which on the part of the Lessee are or ought to have been
performed observed or fulfilled.
In the case of a breach by the Lessee of any covenant, agreement,
condition or stipulation to which Section 146 of the Property Law Act
does so extend at the expiration of fourteen days from the service of
the notice referred to in sub-section (1) of the said Section 146 to
enter into or upon the Demised Premises or any part thereof in the
name of the whole.
In either case the Lessor may expel and exclude therefrom the Lessee
and all or any persons claiming under the Lessee and to remove all
goods and effects found upon the Demised Premises without in any case
being taken or deemed to be guilty of any manner of trespass and
without being in any manner liable at law or otherwise and released
from all and every claim by the Lessee for any act, matter or thing
done or omitted to be done by the Lessor under the powers and
authorities hereby conferred or intended so to be and without
prejudice to any right of action or remedy of the Lessor for arrears
of rent or any of the covenants of the Lessee or of the other
conditions, agreements and stipulations herein contained.
Thereupon this Lease shall if the Lessor so elects determine and be at
an end and the Lessee shall remain liable for rent to the date of such
re-entry and at the rate herein before reserved, and in any such case
this Lease may be produced as a Notice to Quit duly given and expired.
4.2 Matters Deemed Not To Affect Lessor's Rights
If the Lessee shall vacate the Demised Premises during the said term
(whether or not the Lessee ceases to pay the rental or other moneys
payable hereunder):
4.2.1 acceptance of the keys and/or entry into the Demised Premises
by the Lessor or by any person on the Lessor's behalf for the
purposes of inspection or for the purposes of showing the
premises to prospective tenants and/or the advertising of the
Demised Premises for reletting shall not constitute a re-entry
or forfeiture or waiver of the Lessor's right to recover in
full all rental and other moneys from time to time payable
hereunder.
4.2.2 in the absence of a written agreement by the Lessor to accept
the surrender of the Lessee's interest hereunder or a formal
notice of forfeiture or re-entry this Lease shall be deemed to
continue in full force and effect until the date as from which
a new Lessee actually commences to occupy the Demised Premises.
<PAGE>
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4.2.3 any entry by the Lessor into the Demised Premises in the
meantime shall be deemed an entry by the leave and licence of
the Lessee.
5. DAMAGE, DESTRUCTION
If at any time the Demised Premises or part thereof shall be in the opinion
of the Lessor rendered unfit for occupation or use by reason of fire or
otherwise then and in any such case the Lessor may at his option determine
the Lease hereby created or may restore and reinstate the Demised Premises
so as to be fit again for occupation and in the latter case except as
hereinafter provided, the rent or a proportionate part thereof shall not be
payable in respect of any period during which the Demised Premises or part
thereof shall in the opinion of the Lessor be unfit for occupation or use
but this provision for cessation of rent shall not apply if the policy of
insurance against fire shall have been vitiated or if a renewal thereof
shall have been refused in consequence of some act or default of the Lessee
or the agents, servants, employees, invitees or charges of the Lessee or if
the fire or otherwise shall have been caused through any act or omission of
the Lessee or the agents, servants, employees, charges or invitees of the
Lessee PROVIDED THAT if the Demised Premises be destroyed or rendered unfit
for occupation for a period estimated by the Lessor to be beyond six months
then the Lessee may by one week's written notice to the Lessor determine
this Lease.
6. BANK GUARANTEE
6.1 The Lessee shall forthwith provide to the Lessor a Bank Guarantee to
the amount specified in Item 12 of the Schedule ("the Bank Guarantee")
to be held by the Lessor during the said term as security for the due
and proper performance and observance by the Lessee of all of the
covenants, provisos, conditions and agreements herein contained or
implied and on the Lessee's part to be performed and observed.
6.2 In the event of the Lessee failing to pay the rent or any other moneys
hereby reserved including all rates, taxes and Outgoings on the due
dates for payment thereof the Lessor shall be entitled to have
recourse to the Bank Guarantee to recover all amounts outstanding
referred to herein and to meet any expense incurred by the Lessor as a
result thereof without prejudice to the Lessor's other rights, powers
and remedies in respect of such amounts.
6.3
6.3.1 If the Lessee fails to perform and observe any of the
covenants, provisos, conditions and agreements contained in
this Lease then the Lessor may, provided it has obtained an
order from the relevant court, have recourse to the Bank
Guarantee to remedy any such breach or default and to meet any
expense incurred by the Lessor as a result thereof without
prejudice to the Lessor's
<PAGE>
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other rights, powers and remedies in respect of any such
default or breach.
6.3.2 The provisions of Clause 6.3.1. shall not apply to those
covenants relating to the payment of rent and any other moneys
including, rates, taxes and Outgoings referred to in Clause
6.2.
6.4 At the expiration or sooner determination of the said term the Lessee
having performed and observed all of the said covenants, provisos,
conditions and agreements shall be entitled to a refund of the Bank
Guarantee or such part thereof as has not been applied as aforesaid.
6.5 Without prejudice to any other rights or powers of the Lessor provided
in this Lease, the Lessor shall advise the Lessee in writing seven (7)
days prior to exercising its rights under this Bank Guarantee.
7. RENEWAL OF LEASE
If the Lessee shall wish to take a renewal Lease of the Demised Premises
for a further term being the period (if any) so set out in the said
Schedule from the expiration of the said term AND PROVIDED that the Lessee
shall at least three months before the expiration of the term hereby
created request such renewal by notice in writing to be delivered to the
Lessor at its address last known to the Lessee and to its address herein
appearing and shall have at all times throughout the term duly and
punctually paid the rent reserved by this Lease at the times herein
appointed for payment thereof and shall have at all times throughout the
term duly performed and observed the covenants and agreements by and on the
part of the Lessee contained in this Lease up to the expiration of the term
hereby granted then the Lessor will at the expense of the Lessee grant to
the Lessee a new Lease of the Demised Premises for a further term being the
period (if any) so set out in the said Schedule from the day after the date
of expiration of the said term (hereinafter called "the renewal date") at a
rent to be determined in accordance with the provisions of Annexure 1
hereof which shall apply as if incorporated herein in respect to the first
year of the further term and thereafter in accordance with Clause 2.2 AND
otherwise the renewal Lease shall contain the like covenants and provisos
as are herein contained save as to rental aforesaid and save for the
provisions of this Clause PROVIDED FURTHER ALWAYS that if this Lease is
presently subject to a Guarantee and Indemnity or a Bank Guarantee then the
Lessor shall not be bound to grant a renewal Lease for the further term (if
any) as herein otherwise provided for unless and until the Lessee procures
the execution by a party or parties nominated by the Lessor of a Guarantee
and Indemnity of the renewal Lease in a form approved by the Lessor and/or
the Lessor's solicitors or at the Lessor's option a Bank Guarantee for the
further term. If applicable, the parties herein agree that the last date
for the Lessee to request a renewal lease is the date contained in Item 8
of the Schedule herein.
<PAGE>
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8. HOLDING OVER
If upon the expiration of the said terms the Lessee shall remain in
possession of the Demised Premises without objection by the Lessor the
Lessee shall be considered as from the date of expiry of the term hereby
granted tenant from month to month of the Demised Premises at a rental to
be determined in accordance with the provisions of Clause 2.2 payable in
the manner set out in the Schedule subject to the provisions of this Lease
as far as same can be construed to apply to a monthly tenancy.
9. MAXIMUM AGGREGATE PERIOD
Notwithstanding anything to the contrary in this Lease contained or implied
it is expressly agreed and understood that the maximum aggregate period for
which the Lessee may occupy the Demised Premises is the period set out in
Item 7 of the Schedule as the "maximum aggregate period" from the
commencement date provided that the Lessee will have duly observed and
performed all his obligations and covenants pursuant to this Lease and
provided that he will have duly and properly exercised his right to renew
this Lease for the further term (if any).
10. LESSEE MAY REMOVE PROPERTY
10.1 Prior to the expiration or earlier determination of the term hereby
created (or later the renewal or extension thereof as the case may be)
the Lessee may remove any of his chattels, floor coverings, fixtures
and fittings contained or installed in or affixed to the Demised
Premises by the Lessee during or prior to the term hereof (or later
the renewal or extension thereof as the case may be) PROVIDED ALWAYS
that any damage or loss occasioned thereby shall be made good at the
expense of the Lessee and the Demised Premises are reinstated and
restored by the Lessee to the same standard and condition subsisting
at the date the Lessee began occupation of the Demised Premises or at
the commencement date hereof whichever is the earlier.
10.2 If the Lessee has not so removed the said chattels, floor
coverings, fixtures or fittings, the Lessor may by notice in
writing addressed to the Lessee require the Lessee at the expense
of the Lessee to remove from the Demised Premises within fourteen
(14) days from the expiration or earlier determination of the term
hereof (or later the renewal or extension thereof as the case may
be) all or any of such chattels, floor coverings, fixtures and
fittings and to reinstate and restore the Demised Premises to the
same standard and condition subsisting at the date the Lessee began
occupation of the Demised Premises or the commencement date hereof
whichever is the earlier PROVIDED ALWAYS that the Lessor may at its
option itself cause any such chattels, floor coverings, fixtures or
fittings to be removed and any such damage to be made good and to
reinstate and restore the
<PAGE>
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Demised Premises and may recover the costs thereof from the Lessee
as a liquidated debt payable on demand.
10.3 If the Lessee shall not have so removed any of the said chattels,
floor coverings, fixtures or fittings either as of right or by
requirement of the Lessor as aforesaid, then the same shall be deemed
to be affixed to the Demised Premises and thereupon the Lessee shall
be deemed to have abandoned any claim in or at such chattels, floor
coverings, fixtures and fittings and to have waived any right to
compensation in respect thereof whereupon the same shall become the
property of the Lessor.
10.4 Upon vacating the Demised Premises or at the request of the Lessor
immediately prior thereto, the Lessee shall remove any signs, names,
advertisements or notices erected, painted, displayed, affixed or
exhibited upon, to or within the Demised Premises and shall make good
any damage or disfigurement thereby caused.
11. ZONING AND USE OF PREMISES
The Lessor shall in no way be held liable or responsible or accountable for
the zoning applicable to the Demised Premises and the Lessee hereby
acknowledges that it has checked the zoning applicable to the Demised
Premises and finds the same suitable for its purposes and has obtained all
necessary permits. Should the zoning in respect of the Demised Premises now
or at any time hereafter conflict with the permitted uses hereunder then
notwithstanding such conflict the Lessee shall remain fully liable for
performance of its obligations hereunder. The Lessor in no way warrants
that the premises are suitable for the permitted use described in Item 2 of
the Schedule.
12. LESSEE'S RISK
12.1 To the extent permitted by law or statute, the Lessee indemnifies and
keeps the Lessor indemnified from and against all damages, losses,
costs, charges, expenses, actions, claims and demands which may be
sustained, suffered, recovered or made against the Lessor (by any
person) or for which the Lessor may become liable whether during or
after the term of this Lease in respect of or arising from:
12.1.1 injury or loss which may be sustained by any person when
using or entering or near any portion of the Demised
Premises whether in the occupation of the Lessor or of the
Lessee or of any other person where such injury arises or
has arisen as a result of the negligence of or as a result
of the creation of some dangerous thing or state of affairs
by the Lessee or any agent, servant, employee, charge,
invitee or any other person claiming through or under the
Lessee and whether the existence of such dangerous thing or
<PAGE>
-24-
dangerous state of affairs was or ought to have been known
to the Lessee or not;
12.1.2 loss, damage or injury from any cause whatsoever to property
or to persons within or outside the Demised Premises
occasioned or contributed to by the neglect or default of
the Lessee or any agent, servant, employee, charge, invitee
or other person claiming through or under the Lessee to
observe or perform any of the covenants, conditions,
regulations and restrictions on the part of the Lessee
hereunder whether positive or negative expressed or implied;
12.2.3 loss, damage or injury to the Demised Premises and all
properties therein occasioned or contributed to by the
neglect or default of the Lessee or any agent, servant,
employee, charge, invitee or other person claiming through
or under the Lessee;
12.1.4 the negligent use, misuse, waste or abuse by the Lessee or
any agent, servant, employee, charge, invitee or any other
person claiming through or under the Lessee of any water,
gas, electricity or any other services supplied to the
Demised Premises or the buildings;
12.1.5 the negligent use, misuse, waste or abuse by the Lessee or
any agent, servant, employee, charge, invitee or any other
person claiming through or under the Lessee of any faulty
fittings and fixtures of the Lessee;
12.1.6 the negligent use, misuse, waste or abuse by the Lessee or
any agent, servant, employee, charge, invitee or any other
person claiming through or under the Lessee of the services,
Mechanical Installations or facilities of the Demised
Premises or the buildings;
12.1.7 the overflow leakage or escape of water, fire, gas,
electricity or any other harmful agent whatsoever in or from
the buildings or the Demised Premises caused or contributed
to by any act or omission on the part of the Lessee or any
agent, servant, employee, charge, invitee or any other
person claiming through or under the Lessee;
12.1.8 the failure of the Lessee to immediately notify the Lessor
of any accident or a defect in any of the Mechanical
Installations, appurtenances, water pipes, gas pipes,
electric wiring or other fittings or fixtures contained in
the Demised Premises;
<PAGE>
-25-
12.1.9 loss, damage or injury from any cause whatsoever to property
or person caused or contributed to by the use of the
buildings or the Demised Premises by the Lessee or any
agent, servant, employee, charge, invitee or any other
person claiming through the Lessee;
12.1.10 the occurrence on the Demised Premises during the said term
of any accident or injury to or death of any person or
damage or injury to or loss of the property of any persons;
or
12.1.11 any injury, illness, loss or damage which may be caused to
or suffered by the Lessee or any agent, servant, employee,
charge, invitee or any person claiming through or under the
Lessee resulting from any materials used in or about the
construction or maintenance of the buildings or the fixtures
and fittings therein.
12.2 Notwithstanding Clause 12.1.11, the Lessee shall not be liable to
indemnify the Lessor in respect of any injury, illness, loss or damage
which may be caused to or suffered by the Lessee or any agent,
servant, employee, charge, invitee or any other person claiming
through or under the Lessee resulting from any materials used in or
about the construction or maintenance of the buildings or the fixtures
and fittings therein prior to the commencement of the Lease provided
that:
12.2. 1 the Lessee acknowledges that a visual inspection of the
Demised Premises and the building of which the Demised
Premises forms part has been conducted. The Lessee
undertakes to notify the Lessor of any defects which may
become apparent to the Lessee during the term of the Lease.
12.2.2 the Lessee shall be responsible for any injury, illness,
loss or damage resulting from any act, neglect or default on
the part of the Lessee.
12.3 The Lessee agrees to occupy use and keep the Demised Premises at the
risk of the Lessee and hereby releases to the full extent permitted
by law the Lessor and its agents, servants, contractors and employees
(save for the consequences of any wilful act on their part) from all
claims and demands of every kind resulting from any accident, damage
or injury occurring therein and the Lessee expressly agrees that in
the absence of any such negligence as aforesaid the Lessor shall have
no responsibility or liability for any loss of or damage to fixtures
or personal property of the Lessee.
<PAGE>
-26-
12.4 Without limiting the generality of the foregoing the Lessee
acknowledges that the Lessor shall not be liable to the Lessee or to
any other person in respect of loss or damage suffered as a result of
fire or explosion or the escape of water liquids or sewerage or by
reason of any fault or failure of any of the Mechanical Installations
or any electric, gas, water or sewerage system installation or
apparatus or any fire protective or alarm system in the buildings or
by insufficiency or absence of lighting or by the bursting, running or
leaking of any tank closet tape or pipe or by rain or other water
being upon or entering the Demised Premises through the roof,
skylight, vent, window, trapdoor or otherwise or for any damage
arising from any act or neglect of other occupiers of the buildings or
of any adjacent property or the public or from any other cause
howsoever occurring or from any structural defect and the Lessor shall
not be liable in damages or otherwise for any failure to furnish or
interruption of service of lift, escalator, water, gas, electricity,
heated water, steam and chilled water caused by mechanical breakdown,
fire, accident, riot, strike, labour disputes, Acts of God the making
of any repairs or improvements or other causes beyond the control of
the Lessor PROVIDED ALWAYS that such loss or damage is not occasioned
by any wilful act of the Lessor its servants or agents.
13. ESSENTIAL COVENANTS
That the covenants by the Lessee contained or implied in the clauses to pay
rent, rates, taxes and all other charges, impositions, Outgoings,
maintenance, repairs, assignments, sub-letting or otherwise of the Demised
Premises, use of and licenses relating to the Demised Premises and
insurances with regard to the Demised Premises are essential and
fundamental terms to this Lease and the breach or non-observance or
non-performance of any one or more such covenants, terms and conditions
shall be deemed to be a fundamental breach of the provisions of this Lease
on the part of the Lessee to be observed and performed PROVIDED THAT the
presence of this Clause in this Lease shall not mean or be construed as
meaning that there are no other fundamental and/or essential terms in this
Lease. Should the Lessor terminate this Lease following any such
fundamental breach or otherwise, then without prejudice to any other right
or remedy of the Lessor herein contained or implied, IT IS EXPRESSLY AGREED
AND DECLARED that the Lessor shall be entitled to recover from the Lessee
as and by way of liquidated damages for such breach the difference between
the aggregate of the rent, the Lessee's obligations to pay rates, taxes,
other impositions and Outgoings in relation to the Demised Premises and
other monies that would have been payable by the Lessee for the unexpired
residue of the term but for such determination calculated from the date of
such determination to the date of termination of this Lease referred to in
the Schedule of this Lease LESS the aggregate of the several rental and
other monies which the Lessor by taking proper steps to re-let the Demised
Premises shall obtain or could reasonably be expected to obtain by
re-letting the Demised Premises for the unexpired residue of the term (if
any) PROVIDED that in so doing the Lessor shall not be required to oblige
to offer or accept in respect of such re-letting
<PAGE>
-27-
terms, covenants, conditions or stipulations which are the same or similar
to the terms, covenants, conditions or stipulations herein contained or
implied.
14. MORTGAGE OF PREMISES
The parties hereto HEREBY JOINTLY ACKNOWLEDGE AND AGREE that the Lessor
shall have the right at any time to mortgage or otherwise charge the
Demised Premises without prejudice to the rights of the Lessee hereunder
without obtaining or requiring the consent by the Lessee to such Mortgage
or Charge and the Lessee FURTHER AGREES to sign documents and do all such
reasonable acts, matters or things that may be required to enable
registration in the Office of Titles of such Mortgage PROVIDED ALWAYS that
any legal costs so incurred by the Lessee pursuant to this provision shall
be paid by the Lessor.
15. SUITABILITY OF THE PREMISES
15.1 The Lessee acknowledges that no promise, representation, warranty or
undertaking has been given by or on behalf of the Lessor in respect of
the suitability of the buildings or the Demised Premises for any
purpose or for any business to be carried on therein or as to the
fittings, finishes, facilities and amenities of the buildings or the
Demised Premises and all warranties (if any) implied by law are hereby
so far as legally possible expressly negatived.
15.2 The Lessee acknowledges and declares that no promise, representation,
warranty or undertaking either express or implied has been given by or
on behalf of the Lessor or can be said to be deemed to have arisen as
to the suitability of the Demised Premises for any business to be
carried on therein by the Lessee or as to the quality, nature or
extent of any of the fittings, finishes, facilities and amenities of
the Demised Premises or any of the common areas appurtenances services
and mechanical installations that the Lessee is to be entitled to use
and enjoy either alone or in common with others or as to the use or
purpose to which the Demised Premises may lawfully be put or otherwise
as to any business that may lawfully be carried on in the Demised
Premises and notwithstanding that the Lessee may have made known to
the Lessor or any person acting for it the nature of the Lessee's
present business or of any other business that the Lessee wishes to
carry on in the Demised Premises.
16. VICARIOUS RESPONSIBILITY
The Lessee shall not permit any of the Lessee's servants, agents or so far
as the Lessee can control them the Lessee's customers or invitees to commit
a breach of or make default in performing any of the covenants on the part
of the Lessee herein contained.
<PAGE>
-28-
17. FIRE HAZARD
The Lessee shall not in any way create any actual or potential fire hazard
in the buildings or the Demised Premises or in any part thereof and will
permit the Lessor at all times to enter upon the Demised Premises and to
abate any actual or potential fire hazard in or about the Demised Premises
and if such hazard in the reasonable opinion of the Lessor is caused by or
results from the use or occupancy of the Demised Premises by the Lessee the
Lessee shall pay to the Lessor the costs and expenses incurred by the
Lessor in carry out such work.
18. MORATORIUM
The Lessee shall not be entitled to the benefit of any Acts, Regulations or
proclamations in the nature or having the effect of a moratorium or
purporting to effect any reduction in rent or interest whether already
passed made or authorized or hereafter to be passed made or authorized by
the Federal or State Parliament or other responsible body or authority
thereunder and that such Acts, Regulations and proclamations shall not
apply hereto.
19. GOVERNING LAW
This Lease shall be governed by and construed in accordance with the Laws
of the State of Victoria and if any provisions of this Lease shall to any
extent be invalid the remainder of this Lease shall not be affected
thereby.
20. NO REPRESENTATIONS
There are no oral or written agreements between the Lessor and Lessee
affecting this Lease other than the written agreement for Lease (if any) to
which this Lease was attached and which was made by the parties hereto in
respect of the Demised Premises and that this Lease is not entered into in
reliance on any representations or warranties express or implied, save as
may be specifically set out herein.
21. NOTICES
Any notice to the Lessee hereunder, notwithstanding any other provision
herein to the contrary contained or implied shall be deemed to be duly
given if left at the Demised Premises or addressed to the Lessee at the
Demised Premises and duly posted. A notice sent by post shall be deemed to
have been duly served at twelve (12) noon on the day next following such
posting.
22. JOINT AND SEVERAL LIABILITY
That in the event of the Lessee consisting of more than one party then the
covenants herein contained and on the part of the Lessee to be observed and
performed shall be deemed to be entered into both jointly and severally by
the parties constituting the Lessee.
<PAGE>
-29-
23. MISCELLANEOUS
23.1 Amendment
This Lease may be amended only by instruments in writing executed by
the Lessor and Lessee.
23.2 No Relationship
Nothing herein contained shall be deemed or construed (by the parties
hereto nor by any third party) as creating the relationship of
principal and agent or of partnership or of joint venture between the
parties hereto it being understood and agreed that no provision
contained herein shall be deemed to create any relationship between
the parties hereto other than the relationship of Lessor and Lessee.
23.3 Waiver
No waiver by the Lessor of a breach of any covenant, obligation or
provision in this Lease contained or implied shall, operate as a
waiver of another breach of the same or any other covenant, obligation
or provision in this Lease contained or implied.
23.4 Index and Headings
The Index and all headings in this Lease are not intended to and do
not constitute parts of the Lease and only act as a guide to finding
the relevant clauses.
23.5 Schedule and Annexures
The Schedule, Annexures and Special Conditions (if any) are intended
to and do form part of this Lease.
23.6 Severance, Reading Down
The several covenants and conditions and each and every part thereof
contained in this Lease, shall be so construed as not to infringe the
provisions of any Act whether State or Federal, but if any such
covenant or condition in its true interpretation does infringe any
such provision, that covenant or condition shall be read down to such
extent as may be necessary to ensure that it does not so infringe and
as may be reasonable in all circumstances so as to give it a valid
operation of a partial character and in the event that the infringing
covenant or condition cannot be so read down it shall be deemed to be
void and severable.
<PAGE>
-30-
EXECUTED BY THE PARTIES
THE COMMON SEAL of ENFIELD )
VIEW PTY LTD (A.C.N. 007 382 603) ) (SEAL)
was hereunto affixed in )
accordance with its Articles )
of Association in the )
presence of: )
/s/ J.P. Shannon DIRECTOR
- -----------------------
J.P. Shannon Name of Director (print)
- -----------------------
/s/ illegible SECRETARY
- -----------------------
illegible Name of Secretary (print)
- -----------------------
THE COMMON SEAL of RECOIL )
PTY LTD (A.C.N. 006 664 7311) ) (SEAL)
was hereunto affixed in accordance with )
its Articles of Association in the )
presence of: )
/s/ B.F. Ball DIRECTOR
- -----------------------
B.F. Ball Name of Director (print)
- -----------------------
/s/ K.D. Jones DIRECTOR
- -----------------------
K.D. Jones Name of Director (print)
- -----------------------
11th Day of August 1995
Commonwealth Bank as Mortgageee under Memorandum of Mortgage No. A571511D of the
premise demised by the within lease hereby conents to such lease.
/s/ illegible
<PAGE>
SCHEDULE
ITEM
1. DEMISED PREMISES: All that piece of land being Lots, 6, 7 and part of Lot
8 on Plan of Subdivision No. 136910 lodged in the
Titles Office and described in Certificate of Title
Volume 9518 Folio 994 and situated at 20 Stamford Road,
Oakleigh
2. USE OF PREMISES: Office, warehouse and light industrial manufacturing
3. RENTAL: TEN THOUSAND SIX HUNDRED AND NINETY DOLLARS AND SIXTY-
THREE CENTS ($10,690.63) per calendar month payable
monthly in advance from the commencement date.
No rent is payable for the period from the commencement
date to 31 October 1995.
Nothing in this Schedule shall relieve the Lessee of
its obligations to pay the Outgoings.
4. RENT REVIEW DATES: Annually from the commencement date
5. TERM OF LEASE: Five (5) years
6. FURTHER TERM: One (1) further term of five (5) years
7. MAXIMUM AGGREGATE
PERIOD Ten (10) years
8. LAST DATE FOR
EXERCISE OF OPTION: 30 April 2000
9. COMMENCEMENT DATE: 1st August 1995
10. CHATTELS: Airconditioner, Partitioning, Carpets, Sprinkler System
(Garden) and Fire Fighting Equipment
11. SECURITY DEPOSIT: Nil
<PAGE>
12. BANK GUARANTEE: Bank Guarantee of seventy thousand dollars ($70,000.00)
for the term of this Lease. The Bank Guarantee for the
further term shall be the average six (6) monthly
rental payable during the further term based on an
annual rental increase of four percent (4%) pursuant to
Clause 2.2, rounded up to the nearest one thousand
dollars ($1,000.00).
<PAGE>
LEASE
INDEX
CLAUSE
Recitals
1. DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. LESSEE'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Rent Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Rates, Taxes and Outgoings . . . . . . . . . . . . . . . . . . . . 4
2.4 General Positive Covenants . . . . . . . . . . . . . . . . . . . . 5
2.4.1 Consumables. . . . . . . . . . . . . . . . . . . . . . . . 5
2.4.2 Clean the Premises . . . . . . . . . . . . . . . . . . . . 5
2.4.3 Repair and Maintain. . . . . . . . . . . . . . . . . . . . 5
2.4.4 Clean Windows. . . . . . . . . . . . . . . . . . . . . . . 6
2.4.5 Make Good Damage . . . . . . . . . . . . . . . . . . . . . 6
2.4.6 Repair Damage Caused to Adjoining Premises . . . . . . . . 6
2.4.7 Disposal of Rubbish. . . . . . . . . . . . . . . . . . . . 6
2.4.8 Notice of Defects. . . . . . . . . . . . . . . . . . . . . 6
2.4.9 Comply with Acts . . . . . . . . . . . . . . . . . . . . . 6
2.4.10 Use of Premises. . . . . . . . . . . . . . . . . . . . . . 7
2.4.11 Inspection . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4.12 Maintenance and Alteration . . . . . . . . . . . . . . . . 8
2.4.13 Lessor's Costs . . . . . . . . . . . . . . . . . . . . . . 8
2.4.14 Costs of Default . . . . . . . . . . . . . . . . . . . . . 8
2.4.15 Interest on Default. . . . . . . . . . . . . . . . . . . . 8
2.4.16 Exhibit "To Let" Sign . . . . . . . . . . . . . . . . . . 9
2.4.17 Inspection at End of Term. . . . . . . . . . . . . . . . . 9
2.4.18 Keep Premises Open . . . . . . . . . . . . . . . . . . . . 9
2.4.19 Locking of Property. . . . . . . . . . . . . . . . . . . . 9
2.4.20 Garden . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4.21 Delivering Up. . . . . . . . . . . . . . . . . . . . . . . 10
2.4.22 Lessee's Works . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.5.1 Insurance Charges. . . . . . . . . . . . . . . . . . . . . 10
2.5.2 Pay or Reimburse . . . . . . . . . . . . . . . . . . . . . 12
2.5.3 Application of Insurance Money . . . . . . . . . . . . . . 12
2.5.4 Insurance against storage of Hazardous Chemicals . . . . . 12
2.6 General Negative Covenants . . . . . . . . . . . . . . . . . . . . 12
2.6.1 Not to Sleep on Premises . . . . . . . . . . . . . . . . . 12
2.6.2 No Illegal Immoral Purpose . . . . . . . . . . . . . . . . 12
2.6.3 No Rubbish . . . . . . . . . . . . . . . . . . . . . . . . 12
2.6.4 No Alterations/Additions . . . . . . . . . . . . . . . . . 12
<PAGE>
ii
2.6.5 Not to Vitiate Insurance . . . . . . . . . . . . . . . . . 13
2.6.6 No Noxious Offensive Business. . . . . . . . . . . . . . . 13
2.6.7 No Auction Sale. . . . . . . . . . . . . . . . . . . . . . 13
2.6.8 Hazardous Chemicals. . . . . . . . . . . . . . . . . . . . 13
2.6.9 Approved Heating . . . . . . . . . . . . . . . . . . . . . 13
2.6.10 No Animals . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.11 No Sweeping. . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.12 No Noise . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.13 Signs. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.6.14 Damage to the Demised Premises . . . . . . . . . . . . . . 15
2.7 Assignment Mortgage and/or Parting with Possession . . . . . . . . 15
2.7.1 Provisions for Assignment, etc.. . . . . . . . . . . . . . 15
2.7.2 Lessee Corporation . . . . . . . . . . . . . . . . . . . . 16
3. LESSOR'S COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.1 Quiet Enjoyment. . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Comply With Terms. . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Structural Maintenance and Repair. . . . . . . . . . . . . . . . . 17
3.4 Refrigerants . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4. MUTUAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.2 Matters Deemed Not To Affect Lessor's Rights . . . . . . . . . . . 19
5. DAMAGE, DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6. BANK GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7. RENEWAL OF LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8. HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9. MAXIMUM AGGREGATE PERIOD. . . . . . . . . . . . . . . . . . . . . . . . 22
10. LESSEE MAY REMOVE PROPERTY. . . . . . . . . . . . . . . . . . . . . . . 22
11. ZONING AND USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . 23
12. LESSEE'S RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. ESSENTIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14. MORTGAGE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . 27
15. SUITABILITY OF THE PREMISES . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
iii
16. VICARIOUS RESPONSIBILITY. . . . . . . . . . . . . . . . . . . . . . . . 27
17. FIRE HAZARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
18. MORATORIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
19. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
20. NO REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
21. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
22. JOINT AND SEVERAL LIABILITY . . . . . . . . . . . . . . . . . . . . . . 28
23. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.2 No Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.4 Index and Headings . . . . . . . . . . . . . . . . . . . . . . . . 29
23.5 Schedule and Annexures . . . . . . . . . . . . . . . . . . . . . . 29
23.6 Severance, Reading Down. . . . . . . . . . . . . . . . . . . . . . 29
SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
EXHIBIT 10.8(a)
GENERAL TERMS AGREEMENT
between
THE BOEING COMPANY
and
KAYNAR TECHNOLOGIES INCORPORATED
Number BCA-65751-029
-------------
KAYNAR TECH BCAG CONTRACT 07-01-95 BCA-65751-029
<PAGE>
GENERAL TERMS AGREEMENT
TABLE OF CONTENTS
SECTION TITLE
- ------- -----
1.0 DEFINITIONS
2.0 ISSUANCE OF PURCHASE ORDERS
AND APPLICABLE TERMS
2.1 Issuance of Purchase Orders
2.2 Acceptance of Purchase Orders
2.3 Written Authorization to Proceed
2.4 Rejection of Purchase Orders
3.0 TITLE AND RISK OF LOSS
4.0 DELIVERY
4.1 Requirements
4.2 Delay
4.3 Notice of Labor Disputes
5.0 ON-SITE REVIEW AND RESIDENT
REPRESENTATIVES
5.1 Review
5.2 Resident Representatives
6.0 INVOICE AND PAYMENT
7.0 PACKING AND SHIPPING
8.0 QUALITY ASSURANCE, INSPECTION
REJECTION AND ACCEPTANCE
8.1 Controlling Document
8.2 Seller's Inspection
8.3 Boeing's Inspection and Rejection
8.4 Federal Aviation Administration or
Equivalent Government Agency Inspection
8.5 Retention of Records
KAYNAR TECH BCAG CONTRACT 07-01-95 ii BCA-65751-029
<PAGE>
SECTION TITLE
- ------- -----
8.6 Source Inspection
8.7 Language for Technical Information
9.0 EXAMINATION OF RECORDS
10.0 CHANGES
10.1 General
10.2 Model Mix
11.0 PRODUCT ASSURANCE
12.0 TERMINATION FOR CONVENIENCE
13.0 EVENTS OF DEFAULT AND REMEDIES
14.0 EXCUSABLE DELAY
15.0 SUSPENSION OF WORK
16.0 TERMINATION OR CANCELLATION: INDEMNITY
AGAINST SUBCONTRACTOR'S CLAIMS
17.0 ASSURANCE OF PERFORMANCE
18.0 RESPONSIBILITY FOR PROPERTY
19.0 LIMITATION OF SELLER'S RIGHTS TO
ENCUMBER ASSETS
20.0 PROPRIETARY INFORMATION AND
ITEMS
21.0 COMPLIANCE WITH LAWS
22.0 INTEGRITY IN PROCUREMENT
23.0 INFRINGEMENT
24.0 BOEING'S RIGHTS IN SELLER'S, PATENTS
COPYRIGHTS, TRADE SECRETS AND TOOLING
25.0 NOTICES
25.1 Addresses
25.2 Effective Date
25.3 Approval or Consent
KAYNAR TECH BCAG CONTRACT 07-01-95 iii BCA-65751-029
<PAGE>
SECTION TITLE
- ------- -----
26.0 PUBLICITY
27.0 PROPERTY INSURANCE
27.1 Insurance
27.2 Certificate of Insurance
27.3 Notice of Damage or Loss
28.0 RESPONSIBILITY FOR PERFORMANCE
28.1 Subcontracting
28.2 Reliance
28.3 Assignment
29.0 NON-WAIVER
30.0 HEADINGS
31.0 PARTIAL INVALIDITY
32.0 APPLICABLE LAW
33.0 AMENDMENT
34.0 LIMITATION
35.0 TAXES
35.1 Inclusion of Taxes in Price
35.2 Litigation
35.3 Rebates
36.0 FOREIGN PROCUREMENT OFFSET
37.0 ENTIRE AGREEMENT/ORDER
OF PRECEDENCE
37.1 Entire Agreement
37.2 Incorporated By Reference
37.3 Order of Precedence
37.4 Disclaimer
KAYNAR TECH BCAG CONTRACT 07-01-95 iv BCA-65751-029
<PAGE>
AMENDMENT
AMEND
NUMBER DESCRIPTION DATE APPROVAL
- ------ ----------- -------------
KAYNAR TECH BCAG CONTRACT 07-01-95 v BCA-65751-029
<PAGE>
GENERAL TERMS AGREEMENT
RELATING TO
BOEING PRODUCTS
THIS GENERAL TERMS AGREEMENT ("Agreement") is entered into as of
September 20, 1996, by and between Kaynar Technologies Incorporated, a
California corporation, with its principal office in Fullerton, California,
("Seller"), and The Boeing Company, a Delaware corporation with its principal
office in Seattle, Washington acting by and through its division the Boeing
Commercial Airplane Group ("Boeing").
RECITALS
A. Boeing produces commercial airplanes.
B. Seller manufactures and sells certain goods and services for use in the
production and support of such aircraft.
C. Seller desires to sell and Boeing desires to purchase certain of Seller's
goods and services in accordance with the terms set forth in this
Agreement.
Now therefore, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
KAYNAR TECH BCAG CONTRACT 07-01-95 1 BCA-65751-029
<PAGE>
AGREEMENTS
1.0 DEFINITIONS
The definitions set forth below shall apply to the following terms as
they are used in this Agreements, any Order, or any related Special
Business Provisions ("SBP"). Words importing the singular number
shall also include the plural number and vice versa.
(a) "Customer" means an owner, operator or user of Products and any
other individual, partnership, corporation or entity which has or
acquires any interest in the Products from, through or under
Boeing.
(b) "Derivative" means any new model airplane designated by Boeing as
a derivative of an existing Model airplane and which: (1) has the
same number of engines as the existing model airplane:
(2) utilizes essentially the same aerodynamic and propulsion
design, major assembly components, and systems as the existing
model airplane and (3) achieves other payload/range combinations
by changes in body length, engine thrust, or variations in
certified gross weight.
(c) "Drawing" means an automated or manual depiction of graphics or
technical information representing a Product or any part thereof
and which includes the parts list and specifications relating
thereto.
(d) "End Item Assembly" means any Product which is described by a
single part number and which is comprised of more than one
component part:
(e) "FAA" means the United States Federal Aviation Administration or
any successor agency thereto.
(f) "FAR" means the Federal Acquisition Regulations in effect on the
date of this Agreement.
(g) "Material Representative" means the individual designated from
time to time, by Boeing as being primarily responsible for
interacting with Seller regarding this Agreement and any Order.
(h) "Order" means each purchase order issued by Boeing and accepted
by Seller under the terms of this Agreement. Each Order is a
contract between Boeing and Seller.
(i) "Product" means goods, including components and parts thereof,
services, documents, data, software, software documentation and
other information or items furnished or to be furnished to Boeing
under any Order, including Tooling except for Rotating Use Tools.
(j) "Purchased on Assembly Production Detail Part (POA)" means a
component part of an End Item Assembly.
(k) "Shipset" means the total quantity of a given part number or
material necessary for production of one airplane.
KAYNAR TECH BCAG CONTRACT 07-01-95 2 BCA-65751-029
<PAGE>
(l) "Spare" means any Product' regardless of whether the Product is
an End Item Assembly or a Purchased on Assembly Production Detail
Part, which is intended for use or sale as a spare part or a
production replacement.
(m) "Tooling" means all tooling, as defined in Boeing Document M31-24,
"Boeing Suppliers Tooling Manual," and/or described on any Order,
including but not limited to Boeing-Use Tooling, Supplier-Use
Tooling and Common-Use Tooling as defined in Boeing
Document D6-49004, "Operations General Requirements for
Suppliers.' and Rotating-Use Tooling as defined in Boeing
Document M31-13. Accountability of Inplant/Outplant Special
(Contract) Tools." For purposes of this Agreement, in the
documents named in this subparagraph, the term "Supplier Use
Tooling" shall be changed to Seller Use Tooling.
2.0 ISSUANCE OF ORDERS AND APPLICABLE TERMS
2.1 ISSUANCE OF ORDERS
Boeing may issue Orders to Seller from time to time. Each Order shall
contain a description of the Products ordered, a reference to the
applicable specifications and Drawings, the quantities and prices, the
delivery schedule, the terms and place of delivery and any special
conditions.
Each Order which incorporates this Agreement shall be governed by and
be deemed to include the provisions of this Agreement. Purchase Order
Terms and Conditions, Form D1-4100-4045, Form P252T and any other
purchase order terms and conditions which may conflict with this
Agreement, do not apply to the Orders.
2.2 ACCEPTANCE OF ORDERS
Each Order is Boeing's offer to Seller and acceptance is strictly
limited to its terms. Boeing will not be bound by and specifically
objects to any term or condition which is different from or in
addition to the provisions of the Order, whether or not such term or
condition will materially alter the Order. Seller's commencement of
performance or acceptance of the Order in any manner shall
conclusively evidence Seller's acceptance of the Order as written.
Boeing may revoke any Order prior to Boeing's receipt of Seller's
written acceptance or Seller's commencement of performance.
2.3 WRITTEN AUTHORIZATION TO PROCEED
Boeing's Material Representative may give written authorization to
Seller to commence performance before Boeing issues an Order. If
Boeing in its written authorization specifies that an Order will be
issued, Boeing and Seller shall proceed as if an Order had been
issued. This Agreement, the applicable SBP and the terms stated in
the written authorization shall be deemed to be a part of Boeing's
offer and the parties shall promptly agree on any open Order terms.
If Boeing does not specify in its written authorization that an Order
shall be issued, Boeing's obligation is strictly limited to the terms
of the written authorization. For purposes of this Section 2.3 only,
written authorization includes electronic transmission chosen by
Boeing.
If Seller commences performance before an Order is issued or without
receiving Boeing's prior authorization to proceed, such performance
shall be at Seller's expense.
2.4 REJECTION OF PURCHASE ORDER
Any rejection by Seller of an Order shall specify the reasons for
rejection and any changes or additions that would make the Order
acceptable to Seller; provided, however, that Seller may not reject
any Order for reasons inconsistent with the provisions of this
Agreement or the applicable SBP.
KAYNAR TECH BCAG CONTRACT 07-01-95 3 BCA-65751-029
<PAGE>
3.0 TITLE AND RISK OF LOSS
Title to and risk of any loss of or damage to the Products shall pass
from Seller to Boeing at the F.O.B. point as specified in the
applicable Order, except for loss or damage thereto resulting from
Seller's fault or negligence. Passage of title on delivery does not
constitute Boeing's acceptance of Products.
4.0 DELIVERY
4.1 REQUIREMENTS
Deliveries shall be strictly in accordance with the quantities, the
schedule and other requirements specified in the applicable Order.
Seller may not make early deliveries without Boeing's prior written
authorization. Seller may not make partial deliveries without
Boeing's prior authorization. Deliveries which fail to meet Order
requirements may be returned to Seller at Seller's expense.
4.2 DELAY
Seller shall notify Boeing immediately, of any circumstances that may
cause a delay in delivery, stating the estimated period of delay and
the reasons therefor. If requested by Boeing, Seller shall use
additional effort, including premium effort, and shall ship via air or
other expedited routing to avoid or minimize delay to the maximum
extent possible. All additional costs resulting from such premium
effort or premium transportation shall be borne by Seller with the
exception of such costs attributable to delays caused directly by
Boeing. Nothing herein shall prejudice any of the rights or remedies
provided to Boeing in the applicable Order or by law.
4.3 NOTICE OF LABOR DISPUTES
Seller shall immediately notify Boeing of any actual or potential
labor dispute that may disrupt the timely performance of an Order.
Seller shall include the substance of this Section 4.3, including this
sentence, in any subcontract relating to an Order if a labor dispute
involving the subcontractor would have the potential to delay the
timely performance of such Order. Each subcontractor, however, shall
only be required to give the necessary notice and information to its
next higher-tier subcontractor.
5.0 ON-SITE REVIEW AND RESIDENT REPRESENTATIVES
5.1 REVIEW
At Boeing's request, Seller shall provide at Boeing's facility or at a
place designated by Boeing, a review explaining the status of the
Order, actions taken or planned relating to the Order and any other
relevant information. Nothing herein maybe construed as a waiver of
Boeing's rights to proceed against Seller because of any delinquency.
Boeing's authorized representatives may enter Seller's plant at all
reasonable times to conduct preliminary inspections and rests of the
Products and work-in-process. Seller shall include in its subcontracts
issued in connection with an Order a like provision giving Boeing the
right to enter the premises of Seller's subcontractors. When
requested by Boeing, Seller shall accompany Boeing to Seller's
subcontractors.
5.2 RESIDENT REPRESENTATIVES
Boeing may in its discretion and for such periods as it deems
necessary assign resident personnel at Seller's facilities. Seller
shall furnish, free of charge, all office space, secretarial service
and other facilities and assistance reasonably required by Boeing's
representatives at Seller's plant. The resident team will function
under the guidance of Boeing's manager. The resident team will
provide communication and coordination to ensure timely performance of
the Order. Boeing's resident team shall be allowed access to all work
areas. Order status reports and management review necessary to assure
timely performance and conformance with the requirements of each
Order. Notwithstanding such assistance, Seller remains solely
responsible for performing in accordance with each Order.
KAYNAR TECH BCAG CONTRACT 07-01-95 4 BCA-65751-029
<PAGE>
6.0 INVOICE AND PAYMENT
Unless otherwise provided in the applicable Order, invoicing and
payment shall be in accordance with SBP Section 7.0.
7.0 PACKING AID SHIPPING
Seller shall (a) prepare for shipment and suitably pack all Products
to prevent damage or deterioration, (b) where Boeing has not
identified a carrier, secure lowest transportation rates, (c) comply
faith the appropriate carrier tariff for the mode of transportation
specified by Boeing and (d) comply with any special instructions
stated in the applicable Order.
Boeing shall pay no charges for preparation, packing, crating or
cartage unless stated in the applicable Order. Unless otherwise
directed by Boeing, all standard routing shipments forwarded on one
day must be consolidated. Each container must be consecutively
numbered and marked as set forth below. Container and Order numbers
must be indicated on the applicable bill of lading. Two copies of the
packing sheets must be attached to the No. 1 container of each
shipment and one copy in each individual container. Each pack sheet
must include as a minimum the following: a) Seller's name, address and
phone number: b) Order and item number; c) ship date for the Products;
d) total quantity shipped and quantity in each container, if
applicable: e) legible pack slip number: f) nomenclature; g) unit of
measure; h) ship to if other than Boeing; i) warranty data and
certification, as applicable; j) rejection tag, if applicable;
k) Seller's certification that Products comply with Order requirements;
and, l) identification of optional material used, if applicable.
Products sold F.O.B. place of shipment must be forwarded collect.
Seller may not make any declaration concerning the value of the
Products shipped, except on Products where the tariff rating or rate
depends on the released or declared value, and in such event the value
shall be released or declared at the maximum value for the lowest
tariff rating or rate.
The following markings shall be included on each unit container:
a) Seller's name; b) Seller's part number, if applicable: c) Boeing
part number, if applicable; d) part nomenclature; e) Order number:
f) quantity of Products in container; g) unit of measure; h) serial
number, if applicable: i) date (quarter/year) identified as assembly
or rubber cure date, if applicable: j) precautionary handling
instructions or marking as required.
In addition, the following markings/labels shall be included on each
shipping container: a) Name and address of consignee; b) Name and
address of consigner; c) Order number; d) Part number as shown on the
Order; e) Quantity of Products in container: f) Unit of measure:
g) Box number; h) Total number of boxes in shipment: and,
i) Precautionary handling, labeling or marking as required.
8.0 QUALITY ASSURANCE, INSPECTION, REJECTION & ACCEPTANCE
8.1 CONTROLLING DOCUMENT
The controlling quality assurance document for Orders shall be as set
forth in the SBP Section 4.0.
8.2 SELLER'S INSPECTION
Seller shall inspect or otherwise verify that all Products and
components thereof, including those procured from or furnished by
subcontractors or Boeing, comply with the requirements of the Order
prior to shipment to Boeing or Customer. Seller shall be responsible
for all tests and inspections of the Product and any component thereof
during receiving, manufacture and Seller's final inspection. Seller
shall include on each packing sheet a certification that the Products
comply with the requirements of the Order.
KAYNAR TECH BCAG CONTRACT 07-01-95 5 BCA-65751-029
<PAGE>
8.2.1 SELLER'S DISCLOSURE
Seller will immediately notify Boeing when discrepancies in Seller's
processes or Product are discovered or suspected for Products Seller
has delivered.
8.3 BOEING'S INSPECTION AND REJECTION
Unless otherwise specified on an Order, Products shall be subject to
final inspection and acceptance by Boeing at destination,
notwithstanding any payment or prior inspection. Boeing may reject
any Product which does not strictly conform to the requirements of the
applicable Order. Boeing shall by notice, rejection tag or other
communication notify Seller of such rejection. Whenever possible,
Boeing may coordinate with Seller prior to disposition of the rejected
Product(s), however. Boeing shall retain final disposition authority
with respect to all rejections. At Seller's risk and expense, all
such Products will be returned to Seller for immediate repair,
replacement or other correction and redelivery to Boeing: provided,
however, that with respect to any or all of such Products and at
Boeing's election and at Seller's risk and expense, Boeing may:
(a) hold, retain, or return such Products without permitting any
repair, replacement or other correction by Seller: (b) hold or retain
such Products for repair by Seller or, at Boeing's election, for repair
by Boeing with such assistance from Seller as Boeing may require;
(c) hold such Products until Seller has delivered conforming
replacements for such Products; (d) hold such Products until conforming
replacements are obtained from a third party; (e) return such Products
with instructions to Seller as to whether the Products shall be
repaired or replaced and as to the manner of redelivery or (f) return
such Products with instructions that they be scrapped. Upon final
disposition by Boeing that the non-conforming Product(s) are not
subject to repair and prior to the Products being scrapped, Seller
shall render the Product(s) unusable. Seller shall also maintain,
pursuant to their quality assurance system, records certifying
destruction of the applicable Products. Said certification shall
state the method and date of mutilation and destruction of the subject
Product(s). Boeing shall have the right to review and inspect these
records at any time it deems necessary. Failure to comply with these
requirements shall be a material breach of this Agreement and grounds
for default pursuant, to GTA Section 13.0. All repair, replacement
and other corrections and redelivery shall be completed within such
time as Boeing may require. All costs and expenses, loss of value and
any other damages incurred as result of or in connection all with
nonconformance and repair, replacement or other correction may be
recovered from Seller by an equitable price reduction, set-off or
credit against any amounts that may be owed to Seller under the
applicable Order or otherwise.
Boeing may revoke its acceptance of any Products and have the same
rights with regard to the Products involved as if it had originally
rejected them.
8.4 FEDERAL AVIATION ADMINISTRATION OR EQUIVALENT
GOVERNMENT AGENCY INSPECTION
Representatives of Boeing, the FAA or any equivalent government agency
may inspect and evaluate Sellers plant including, but not limited to,
Seller's and subcontractor's facilities, systems, data, equipment,
inventory holding areas, procedures, personnel, testing, and all
work-in-process and completed Products. For purposes of this
Section 8.4, equivalent government agency shall mean those governmental
agencies so designated by the FAA or those agencies within individual
countries which maintain responsibility for assuring aircraft
airworthiness.
8.5 RETENTION OF RECORDS
Quality assurance records shall be maintained on file at Seller's
facility and available to Boeing's authorized representatives. Seller
shall retain such records for a period of not less than seven (7)
Years from the date of final payment under the applicable Order.
KAYNAR TECH BCAG CONTRACT 07-01-95 6 BCA-65751-029
<PAGE>
8.6 SOURCE INSPECTION
If an Order contains a notation that "100% Source Inspection" is
required, the Products shall not be packed for shipment until they
have been submitted to Boeing's quality assurance representative for
inspection. Both the packing list and Seller's invoice must reflect
evidence of this inspection.
8.7 LANGUAGE FOR TECHNICAL INFORMATION
All reports, drawings and other technical information submitted to
Boeing for review or approval shall be in English and shall employ the
units of measure customarily used by Boeing in the United States of
America.
9.0 EXAMINATION OF RECORDS
Seller shall maintain complete and accurate records showing the sales
volume of all Products. Such records shall support all services
performed, allowances claimed and costs incurred by Seller in the
performance of each Order, including but not limited to those factors
which comprise or affect direct labor hours, direct labor rates,
material costs, burden rates and subcontracts. Such records and other
data shall be capable of verification through audit and analysis by
Boeing and be available to Boeing at Seller's facility for Boeing's
examination and audit at all reasonable times from the date of the
applicable Order until three (3) years after final payment under such
Order. Seller shall provide assistance to interpret such data if
requested by Boeing. Such examination shall provide Boeing with
complete information regarding Seller's performance for use in price
negotiations with Seller relating to existing or future orders for
Products, including but not limited to negotiation of equitable
adjustments for changes and termination/obsolescence claims pursuant
to GTA Section 10.0. Boeing shall treat all information disclosed
under this Section as confidential.
10.0 CHANGES
10.1 GENERAL
Boeing's Material Representative may at any time by written change
order make changes within the general scope of an Order in any one or
more of the following: drawings, designs, specifications, shipping,
packing, place of inspection, place of delivery, place of acceptance,
adjustments in quantities, adjustments in delivery schedules, or the
amount of Boeing furnished material. Seller shall proceed
immediately to perform the Order as changed. If any such change
causes an increase or decrease in the cost of or the time required for
the performance of any part of the work, whether changed or not
changed by the change order, an equitable adjustment shall be made in
the price of or the delivery schedule for those Products affected, and
the applicable Order shall be modified in writing accordingly. Any
claim by Seller for adjustment under this Section 10.1 must be
received by Boeing in writing no later than (60) days from the date of
receipt by Seller of the written change order or within such further
time as the parties may agree in writing or such claim shall be deemed
waived. Nothing in this Section 10.1 shall excuse Seller from
proceeding with an Order as changed, including failure of the parties
to agree on any adjustment to be made under this Section 10.1.
If Seller considers that the conduct of any of Boeing's employees has
constituted a change hereunder, Seller shall immediately notify
Boeing's Material Representative in writing as to the nature of such
conduct and its effect on Seller's performance. Pending direction
from Boeing's Material Representative, Seller shall take no action to
implement any such change.
KAYNAR TECH BCAG CONTRACT 07-01-95 7 BCA-65751-029
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10.2 MODEL MIX
In the event any Derivative aircraft(s) is introduced by Boeing,
Boeing may (but is not obligated to) direct Seller within the scope or
the applicable Order and in accordance with the provisions or GTA
Section 10.0 to supply Boeing's requirements for Products for such
Derivative aircraft(s) which correspond to those Products being
produced under the applicable Order.
11.0 PRODUCT ASSURANCE
Boeing's acceptance or any Product does not alter or affect the
obligations of Seller or the rights of Boeing and its customers under
the document referenced in the SBP Section 6.0 or as provided by law.
12.0 TERMINATION FOR CONVENIENCE
12.1 BASIS FOR TERMINATION: NOTICE
Boeing may, from time to time and at Boeing's sole discretion,
terminate all or part of any Order issued hereunder by written notice
to Seller. Any such written notice of termination shall specify the
effective date and the extent of any such termination.
12.2 TERMINATION INSTRUCTIONS
On receipt of a written notice of termination pursuant to GTA
Section 12.1, unless otherwise directed by Boeing, Seller shall:
A. Immediately stop work as specified in the notice:
B. Immediately terminate its subcontracts and purchase orders
relating to work terminated;
C. Settle any termination claims made by its subcontractors or
suppliers: provided, that Boeing shall have approved the amount
of such termination claims prior to such settlement;
D. Preserve and protect all terminated inventory and Products;
E. At Boeing's request, transfer title (to the extent not previously
transferred) and deliver to Boeing or Boeing's designee all
supplies and materials, work-inprocess, Tooling and manufacturing
drawings and data produced or acquired by Seller for the
performance of this Agreement and any Order, all in accordance
with the terms of such request:
F. Take all reasonable steps required to return, or at Boeing's
option and with prior written approval to destroy, all Boeing
Proprietary Information and Items in the possession, custody or
control of Seller:
G. Take such other action as, in Boeing's reasonable opinion, may be
necessary, and as Boeing shall direct in writing, to facilitate
termination of this Order; and
H. Complete performance of the work not terminated.
12.3 SELLER'S CLAIM
If Boeing terminates an Order in whole or in part pursuant to
Section 12.1 above, Seller shall have the right to submit a written
termination claim to Boeing in accordance with the terms of this
Section 12.3. Such termination claim shall be submitted to Boeing
riot later than six (6) months after Seller's receipt of the
termination notice and shall be in the form prescribed by Boeing.
Such claim must contain sufficient detail to explain the amount
claimed, including detailed inventory schedules and a detailed
breakdown of all costs claimed separated into categories (e.g.,
materials, purchased parts, finished components, labor, burden,
general and administrative), and to explain the basis for allocation
of all other costs. Seller shall be entitled to be compensated in
accordance with and to the extent allowed under the terms of
FAR 52-249-2(e)-(m) excluding (i), (as published in 48 CFR
Section 52.249-2) which is incorporated herein by this reference except
"Government" and "Contracting Officer" shall mean Boeing, "Contractor"
shall mean Seller and "Contract" shall mean Order.
KAYNAR TECH BCAG CONTRACT 07-01-95 8 BCA-65751-029
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12.4 FAILURE TO SUBMIT A CLAIM
Notwithstanding any other provision of this Section 12.0, if Seller
fails to submit a termination claim within the time period set forth
above, Seller shall be barred from submitting a claim and Boeing shall
have no obligation for payment to Seller under this Section 12.0
except for those Products previously delivered and accepted by Boeing.
12.5 PARTIAL TERMINATION
Any partial termination or an Order shall not alter or affect the
terms and conditions of the Order or any Order with respect to
Products not terminated.
12.6 PRODUCT PRICE
Termination under any of the above paragraphs shall not result in any
change to unit prices for Products not terminated.
12.7 EXCLUSIONS OR DEDUCTIONS
The following items shall be excluded or deducted from any claim
submitted by Seller:
A. All unliquidated advances or other payments made by Boeing to
Seller pursuant to a terminated Order:
B. Any claim which Boeing has against Seller;
C. The agreed price for scrap allowance:
E. Except for normal spoilage and any risk of loss assumed by
Boeing, the agreed fair value of property that is lost,
destroyed, stolen or damaged.
12.8 PARTIAL PAYMENT/PAYMENT
Payment, if any, to be paid under this Section 12.0 shall be made
thirty (30) days after settlement between the parties or as otherwise
agreed to between the parties. Boeing may make partial payments and
payments against costs incurred by Seller for the terminated portion
of the Order, if the total of such payments does not exceed the amount
to which Seller would be otherwise entitled. If the total payments
exceed the final amount determined to be due, Seller shall repay the
excess to Boeing upon demand.
12.9 SELLER'S ACCOUNTING PRACTICES
Boeing and Seller agree that Seller's "normal accounting practices"
used in developing the price of the Product(s) shall also be used in
determining the allocable costs at termination. For purposes of this
Section 12.9, Seller's "normal accounting practices" refers to
Seller's method of charging costs as either a direct charge, overhead
expense, general administrative expense, etc.
12.10 RECORDS
Unless otherwise provided in this Agreement or by law, Seller shall
maintain all records and documents relating to the terminated portion
of the Order for three (3) years after final settlement or Seller's
termination claim.
13.0 EVENTS OF DEFAULT AND REMEDIES
13.1 EVENTS OF DEFAULT
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
KAYNAR TECH BCAG CONTRACT 07-01-95 9 BCA-65751-029
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A. Any failure by Seller to deliver, when and as required by
Agreement or any Order, any Product, except as provided in GTA
Section 14.0: or
B. Any failure by Seller to provide an acceptable Assurance of
Performance within the time specified in GTA Section 14.0, or
otherwise in accordance with applicable law; or,
C. Any failure by Seller to perform or comply with any obligation
set forth in GTA Section 20.0: or
D. Seller is or has participated in the sale, purchase or
manufacture of airplane parts without the required approval of
the FAA.
E. Any failure by Seller to perform or comply with any obligation
(other than as described in the foregoing Sections 13.1.A,
13.1.B, 13.1.C and 13.1.D) set forth in this Agreement and such
failure shall continue unremedied for a period of thirty (30)
days or more following receipt by Seller of notice from Boeing
specifying such failure: or
F. (a) the suspension, dissolution or winding-up of Seller's
business, (b) Seller's insolvency, or its inability to pay debts,
or its nonpayment of debts, as they become due, (c) the
institution of reorganization, liquidation or other such
proceedings by or against Seller or the appointment of a
custodian, trustee, receiver or similar Person for Seller's
properties or business, (d) an assignment by Seller for the
benefit of its creditors, or (e) any action of Seller for the
purpose of effecting or facilitating any of the foregoing.
13.2 REMEDIES
If any Event of Default shall occur:
A. CANCELLATION
Boeing may, by giving written notice to Seller, immediately
cancel this Agreement and/or any Order, in whole or in part, and
Boeing shall not be required after such notice to accept the
tender by Seller of any Products with respect to which Boeing has
elected to cancel this Agreement.
B. COVER
Boeing may by giving written notice to Seller manufacture,
produce or provide, or may engage any other persons to
manufacture, produce or provide, any Products in substitution for
the Products to be delivered or provided by Seller hereunder with
respect to which this Agreement or any Order has been cancelled
and, in addition to any other remedies or damages available to
Boeing hereunder or at law or in equity, Boeing may recover from
Seller the difference between the price for each such Product and
the aggregate expense, including, without limitation,
administrative and other indirect costs, paid or incurred by
Boeing to manufacture, produce or provide, or engage other
persons to manufacture, produce or provide, each such Product.
C. REWORK OR REPAIR
Boeing may rework or repair any Product in accordance with GTA
Section 8.3;
D. SETOFF
Boeing shall, at its option have the right to set off against and
apply to the payment or performance or any obligation, sum or
amount owing at any time to Boeing hereunder or under any Order,
all deposits, amounts or balances held by Boeing for the account
of Seller and any amounts owed by Boeing to Seller, regardless of
whether any such deposit, amount, balance or other amount or
payment is then due and owing.
E. TOOLING AND OTHER MATERIALS
As compensation for the additional costs which Boeing will incur
as a result of the actual physical transfer of production
capabilities from Seller to Boeing or Boeing's designee. Seller
shall upon the request of Boeing, transfer and deliver to Boeing
or Boeing's designee title to any or all (i) Tooling, (ii) Boeing-
furnished material, (iii) raw materials, parts, work-in-process,
incomplete or completed assemblies, and all other Products or
parts thereof in the possession or under the
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effective control of Seller or any of its subcontractors
(iv) Proprietary Information and Materials of Boeing including
without limitation planning data, drawings and other Proprietary
Information and Materials relating to the design, production,
maintenance, repair and use of Tooling, in the possession or
under the effective control of Seller or any of its
subcontractors, in each case free and clear of all liens, claims
or other rights or any person.
Seller shall be entitled to receive from Boeing reasonable
compensation for any item accepted by Boeing which has been
transferred to Boeing pursuant to this Section 13.2.E (except for
any item the price of which shall have been paid to Seller prior
to such transfer) provided, however, that such compensation shall
not be paid directly to Seller, but shall be accounted for as a
setoff against any damages payable by Seller to Boeing as a
result of any Event of Default.
F. REMEDIES GENERALLY
No failure on the part of Boeing in exercising any right or
remedy hereunder, or as provided by law or in equity, shall
impair, prejudice or constitute a waiver of any such right or
remedy, or shall be construed as a waiver of any Event of Default
or as an acquiescence therein. No single or partial exercise of
any such right or remedy shall preclude any other or further
exercise thereof or the exercise of any other right or remedy.
No acceptance of partial payment or performance of any of
Seller's obligations hereunder shall constitute a waiver of any
Event of Default or a waiver or release of payment or performance
in full by Seller of any such obligation. All rights and
remedies of Boeing hereunder and at law and in equity shall be
cumulative and not mutually exclusive and the exercise of one
shall not be deemed a waiver of the right to exercise any other.
Nothing contained in this Agreement shall be construed to limit
any right or remedy of Boeing now or hereafter existing at law or
in equity.
14.0 EXCUSABLE DELAY
If delivery of any Product is delayed by unforeseeable circumstances
beyond the control and without the fault or negligence of Seller or of
its suppliers or subcontractors (any such delay being hereinafter
referred to as "Excusable Delay"), the delivery of such Product shall
be extended for a period to be determined by Boeing after an
assessment by Boeing or alternate work methods. Excusable Delays may
include, but are not limited to, acts of God, war, riots, acts of
government, fires, floods, epidemics, quarantine restrictions, freight
embargoes, strikes or unusually severe weather, but shall exclude
Seller's noncompliance with any rule, regulation or order promulgated
by any governmental agency for or with respect to environmental
protection. However, the above notwithstanding, Boeing expects Seller
to continue production, recover lost time and support all schedules as
established under this Agreement or any Order. Therefore, it is
understood and agreed that (i) delays of less than two (2) days'
duration shall not be considered to be Excusable Delays unless such
delays shall occur within thirty (30) days preceding the scheduled
delivery date of any Product and (ii) if delay in delivery of any
Product is caused by the default of any of Seller's subcontractors or
suppliers, such delay shall not be considered an Excusable Delay
unless the supplies or services to be provided by such subcontractor
or supplier are not obtainable from other sources in sufficient time
to permit Seller to meet the applicable delivery schedules. If
delivery of any Product is delayed by any Excusable Delay for more
than three (3) months, Boeing may, without any additional extension,
cancel all or part of any Order with respect to the delayed Products,
and exercise any of its remedies in accordance with GTA Section 13.2
provided however, that Boeing shall not be entitled to monetary
damages or specific performance to the extent Seller's breach is the
result of an Excusable Delay.
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15.0 SUSPENSION OF WORK
Boeing may at any time, by written order to Seller, require Seller to
stop all or any part of the work called for by this Agreement
hereafter referred to as a "Stop Work Order" issued pursuant to this
Section 15.0. On receipt of a Stop Work Order, Seller shall promptly
comply with its terms and take all reasonable steps to minimize the
occurrence of costs arising from the work covered by the Stop Work
Order during the period of work stoppage. Within the period covered
by the Stop Work Order (including any extension thereof) Boeing shall
either (i) cancel the Stop Work Order or (ii) terminate or cancel the
work covered by the Stop Work Order in accordance with the provisions
of GTA Section 12.0 or 13.0. In the event the Stop Work Order is
cancelled by Boeing or the period of the Stop Work Order (including
any extension thereof) expires, Seller shall promptly resume work in
accordance with the terms of this Agreement or any applicable Order.
16.0 TERMINATION OR CANCELLATION AND INDEMNITY AGAINST SUBCONTRACTOR CLAIMS
Boeing shall not be liable for any loss or damage resulting from any
termination pursuant to GTA Section 12.1, except as expressly provided
in GTA Section 12.3 or any cancellation under GTA Section 13.0 except
to the extent that such cancellation shall have been determined by
Boeing and Seller to have been wrongful, in which case such wrongful
cancellation shall be deemed a termination pursuant to GTA Section 12.1
and therefore shall be limited to the payment to Seller of the
amount or amounts identified in GTA Section 12.3. As subcontractor
claims are included in Seller's termination claim pursuant to GTA
Section 12.3, Seller shall indemnify Boeing and hold Boeing harmless
from and against (i) any and all claims, suits and proceedings against
Boeing by any subcontractor or supplier of Seller in respect of any
such termination and (ii) and any and all costs, expenses, losses and
damages incurred by Boeing in connection with any such claim, suit or
proceeding.
17.0 ASSURANCE OF PERFORMANCE
A. SELLER TO PROVIDE ASSURANCE
If Boeing determines, at anytime or from time to time, that it is
not sufficiently assured of Seller's full, timely and continuing
performance hereunder, or if for any other reason Boeing has
reasonable grounds for insecurity, Boeing may request, by notice
to Seller, written assurance (hereafter an "Assurance of
Performance") with respect to any specific matters affecting
Seller's performance hereunder, that Seller is able to perform
all of its respective obligations under this Agreement when and
as specified herein. Each Assurance of Performance shall be
delivered by Seller to Boeing as promptly as possible, but in any
event no later than 15 calendar days following Boeing's request
therefore and each Assurance of Performance shall be accompanied
by any information, reports or other materials, prepared by
Seller, as Boeing may reasonably request. Boeing may suspend all
or any part of Boeing's performance hereunder until Boeing
receives an Assurance of Performance from Seller satisfactory in
form and substance to Boeing.
B. MEETINGS AND INFORMATION
Boeing may request one or more meetings with senior management or
other employees of Seller for the purpose of discussing any
request by Boeing for Assurance of Performance or any Assurance
of Performance provided by Seller. Seller shall make such
persons available to meet with representatives of Boeing as soon
as may be practicable following a request for any such meeting by
Boeing, and Seller shall make available to Boeing any additional
information, reports or other materials in connection therewith
as Boeing may reasonably request.
18.0 RESPONSIBILITY FOR PROPERTY
On delivery to Seller or manufacture or acquisition by it of any
materials, parts, Tooling or other property, title to any of which is
in Boeing, Seller shall assume the risk of and shall be responsible
for any loss thereof or damage thereto. In accordance
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with the provisions of an Order, but in any event on completion
thereof, Seller shall return such property to Boeing in the condition
in which it was received except for reasonable clear and tear and
except to the extent that such property has been incorporated in
Products delivered under such Order or has been consumed in the normal
performance of work under such Order.
19.0 LIMITATION OF SELLER'S RIGHT TO ENCUMBER ASSETS
Seller warrants to Boeing that it has good title to all inventory,
work-in-process, tooling and materials to be supplied by Seller in the
performance of its obligations under any Order ("Inventory"), and that
pursuant to the provisions of such Order, it will transfer to Boeing
title to such Inventory, whether transferred separately or as part of
any Product delivered under the Order, free of any liens, charges,
encumbrances or rights of others.
20.0 PROPRIETARY INFORMATION AND ITEMS
Boeing and Seller shall each keep confidential and protect from
disclosure all (a) confidential, proprietary, and/or trade secret
information; (b) tangible items containing, conveying, or embodying
such information; and (c) tooling obtained from and/or belonging to
the other in connection with this Agreement or any Order (collectively
referred to as "Proprietary Information and Materials"). Boeing
and Seller shall each use Proprietary Information and Materials of the
other only in the performance of and for the purpose of this Agreement
and/or any Order. Provided, however, that despite any other
obligations or restrictions imposed by this Section 20.0, Boeing shall
have the right to use and disclose of Seller's Proprietary Information
and Materials for the purposes of testing, certification, use, sale,
or support of any item delivered under this Agreement, an Order, or
any airplane including such an item; and any such disclosure by Boeing
shall, whenever appropriate, include a restrictive legend suitable to
the particular circumstances. The restrictions on disclosure or use
of Proprietary Information and Materials by Seller shall apply to all
materials derived by Seller or others from Boeing's Proprietary
Information and Materials. Upon Boeing's request at any time, and in
any event upon the completion, termination or cancellation of this
Agreement, Seller shall return all of Boeing's Proprietary Information
and Materials, and all materials derived from Boeing's Proprietary
Information and Materials to Boeing unless specifically directed
otherwise in writing by Boeing. Seller shall not, without the prior
written authorization of Boeing, sell or otherwise dispose of (as
scrap or otherwise) any parts or other materials containing,
conveying, embodying, or made in accordance with or by reference to
any Proprietary Information and Materials of Boeing. Prior to
disposing of such parts or materials as scrap, Seller shall render
them unusable. Boeing shall have the right to audit Seller's
compliance with this Section 20.0. Seller may disclose Proprietary
Information and Materials of Boeing to its subcontractors as
required for the performance of an Order, provided that each such
subcontractor first assumes, by written agreement, the same
obligations imposed upon Seller under this Section 20.0 relating to
Proprietary Informations and Materials; and Seller shall be liable to
Boeing for any breach of such obligation by such subcontractor. The
provisions of this Section 20.0 are effective in lieu of, and will
apply notwithstanding the absence of, any restrictive legends or
notices applied to Proprietary Information and Materials: and the
provisions of this Section 20.0 shall survive the performance,
completion, termination or cancellation of this Agreement or any
Order. This Section 20.0 supersedes and replaces any and all other
prior agreements or understandings between the parties to the extent
that such agreements or understandings relate to Boeing's obligations
relative to confidential, proprietary, and/or trade secret
information, or tangible items containing, conveying, or embodying
such information, obtained from Seller and related to any Product,
regardless of whether disclosed to the receiving party before or after
the effective date of this Agreement.
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21. COMPLIANCE WITH LAWS
21.1 SELLER'S OBLIGATION
Seller shall be responsible for complying with all laws, including,
but not limited to, any statute, rule, regulation, judgment, decree,
order, or permit applicable to its performance under this Agreement.
Seller further agrees (1) to notify Boeing of any obligation under
this Agreement which is prohibited under applicable environmental law,
at the earliest opportunity but in all events sufficiently in advance
of Seller's performance of such obligation so as to enable the
identification of alternative methods of performance, and (2) to
notify Boeing at the earliest possible opportunity of any aspect of
its performance which becomes subject to additional environmental
regulation or which Seller reasonably believes will become subject to
additional regulation during the performance of this Agreement.
21.2 GOVERNMENT REQUIREMENTS
If any of the work to be performed under this Agreement is performed
in the United States, Seller shall, via invoice or other form
satisfactory to Boeing, certify that the Products covered by the Order
were produced in compliance with Sections 6, 7, and 12 of the Fair
Labor Standards Act (29 U. S. C. 201-291), as amended, and the
regulations and orders of the U.S. Department of Labor issued
thereunder. In addition, the following Federal Acquisition
Regulations are incorporated herein by this reference except
"Contractor" shall mean "Seller":
FAR 52.222-26 "Equal Opportunity"
FAR 52.222-35 "Affirmative Action for Special Disabled and
Vietnam Era Veterans"
FAR 52.222-36 "Affirmative Action for Handicapped Workers".
22.0 INTEGRITY IN PROCUREMENT
Boeing's policy is to maintain high standards of integrity in
procurement. Boeing's employees must ensure that no favorable
treatment compromises their impartiality in the procurement process.
Accordingly, Boeing's employees must strictly refrain from soliciting
or accepting any payment, gift, favor or thing of value which could
improperly influence their judgement with respect to either issuing a
Order or administering this Agreement. Consistent with this policy.
Seller agrees not to provide or offer to provide any employees of
Boeing any payment, gift, favor or thing of value for the purposes of
improperly obtaining or rewarding favorable treatment in connection
with any Order or this Agreement. Seller shall conduct its own
procurement practices and shall ensure that its suppliers conduct
their procurement practices consistent with these standards. If
Seller has reasonable grounds to believe that this policy may have
been violated. Seller shall immediately report such possible
violation to the appropriate Director of Material or Ethics Advisor of
Boeing.
23.0 INFRINGEMENT
Seller shall indemnify, defend, and save Boeing and Customers harmless
from all claims, suits, actions, awards (including but not limited to
awards based on intentional infringement of patents known to Seller at
the time of such infringement, exceeding actual damages, and/or
including attorneys' fees and/or costs), liabilities, damages, costs
and attorneys' fees related to the actual or alleged infringement of
any United States or foreign intellectual property right (including
but not limited to any right in a patent, copyright, industrial design
or semiconductor mask work, or based on misappropriation or wrongful
use of information or documents) and arising out of the manufacture,
sale or use of Products by Boeing or Customers. Boeing and/or
Customers shall duly notify Seller of any such claim, suit or action:
and Seller shall, at its own expense, fully defend such claim, suit or
action on behalf of Boeing and/or Customers. Seller shall have no
obligation under this Section 23.0 with regard to any infringement
arising from: (i) Seller's compliance with formal specifications
issued by
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Boeing where infringement could not be avoided in complying
with such specifications or (ii) use or sale of Products in
combination with other items when such infringement would not have
occurred from the use or sale of those Products solely for the purpose
for which they were designed or sold by Seller. For purposes of this
Section 23.0 only, the term Customer shall not include the United
States Government; and the term Boeing shall include The Boeing
Company (Boeing) and all Boeing subsidiaries and all officers, agents,
and employees of Boeing or any Boeing subsidiary.
24.0 BOEING'S RIGHTS IN SELLER'S PATENTS, COPYRIGHTS, TRADE SECRETS, AND
TOOLING
Seller hereby grants to Boeing an irrevocable, nonexclusive, paid-up
worldwide license to practice and/or use, and license others to
practice and/or use on Boeing's behalf, all of Seller's patents,
copyrights, trade secrets (including, without limitation, designs,
processes, drawings, technical data and tooling), industrial designs,
semiconductor mask works, and tooling (collectively hereinafter
referred to as "Licensed Property") related to the development,
production, maintenance or repair of Products. Boeing hereafter
retains all of the aforementioned license rights in Licensed Property,
but Boeing hereby covenants not to exercise such rights except in
connection with the making, having made, using and selling of Products
or products of the same kind, and then only in the event of any of the
following:
a. Seller discontinues or suspends business operations or the
production of any or all of the Products;
b. Seller is acquired by or transfers any or all of its rights to
manufacture any Product to any third party, whether or not
related;
c. Boeing cancels this Agreement or any Order for cause pursuant to
GTA Section 13.0 herein:
d. in Boeing's judgement it becomes necessary, in order for Seller
to comply with the terms of this Agreement or any Order, for
Boeing to provide support to Seller (in the form of design,
manufacturing, or on-site personnel assistance)substantially in
excess of that which Boeing normally provides to its suppliers:
e. Seller's trustee in bankruptcy (or Seller as debtor in
possession) fails to assume this Agreement and all Orders by
formal entry of an order in the bankruptcy court within sixty
(60) days after entry of an order for relief in a bankruptcy case
of the Seller, or Boeing elects to retain its rights to Licensed
Property under the bankruptcy laws:
f. Seller is at any time insolvent (whether measured under a balance
sheet test or by the failure to pay debts as they come due) or
the subject of any insolvency or debt assignment proceeding under
state or nonbankruptcy law; or
g. Seller voluntarily becomes a debtor in any case under bankruptcy
law or, in the event an involuntary bankruptcy petition is filed
against Seller, such petition is not dismissed within thirty (30)
days.
As a part of the license granted under this Section 24.0, Seller
shall, at the written request of Boeing and at no additional cost to
Boeing, promptly deliver to Boeing any and all Licensed Property
considered by Boeing to be necessary to satisfy Boeing's requirements
for Products and their substitutes.
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25.0 NOTICES
25.1 ADDRESSES
Notices and other communications shall be given in writing by personal
delivery, mail, telex, teletype, telegram, facsimile, cable or other
electronic transmission addressed to the respective party as set forth
in the SBP Section 9.0.
25.2 EFFECTIVE DATE
The date on which any such communication is received by the addressee
is the effective date of such communication.
25.3 APPROVAL OR CONSENT
With respect to all matters subject to the approval or consent of
either party, such approval or consent shall be requested in writing
and is not effective until given in writing. With respect to Boeing,
authority to grant approval or consent is limited to Boeing's Material
Representative.
26.0 PUBLICITY
Seller will not, and will require that its subcontractors and
suppliers of any tier will not, (i) cause or permit to be released any
publicity, advertisement, news release. public announcement, or denial
or confirmation of the same, in whatever form, regarding any Order or
Products, or the program to which they may pertain, or (ii) use, or
cause or permit to be used, the Boeing name or any Boeing trademark in
any form of promotion or publicity without Boeing's prior written
approval.
27.0 PROPERTY INSURANCE
27.1 INSURANCE
Seller shall maintain continuously in effect a property insurance
policy covering loss or destruction of or damage to all property in
which Boeing does or could have an insurable interest pursuant to this
Agreement, including but not limited to Tooling, Boeing-furnished
property, raw materials, parts, work-in process, incomplete or
completed assemblies and all other products or parts thereof, and all
drawings, specifications, data and other materials relating to any of
the foregoing in each case to the extent in the possession or under
the effective care, custody or control of Seller, in the amount of
full replacement value thereof providing protection against all perils
normally covered in an "all risk" property insurance policy (including
without limitation fire, windstorm, explosion, riot, civil commotion,
aircraft, earthquake, flood or other acts of God). Any such policy
shall (i) provide for payment of loss thereunder to Boeing, as loss
payee, when an aggregate amount of Fifty Thousand Dollars ($50,000) of
aforementioned property, as its interests may appear and (ii) contain
a waiver of any rights of subrogation against Boeing, its
subsidiaries, and their respective directors, officers, employees and
agents.
27.2 CERTIFICATE OF INSURANCE
Prior to commencement of this Agreement, Seller shall provide to
Boeing's Material Representative, for Boeing's review and approval,
certificates of insurance reflecting full compliance with the
requirements set forth in GTA Section 27.1. Such certificates shall
be kept current and in compliance throughout the period of this
Agreement and shall provide for thirty (30) days advanced written
notice to Boeing's Material Representative in the event of
cancellation, non-renewal or material change adversely affecting the
interests of Boeing.
27.3 NOTICE OF DAMAGE OR LOSS
Seller shall give prompt written notice to Boeing's Material
Representative of the occurrence of any damage or loss to any property
required to be insured herein. If any such property shall be damaged
or destroyed, in whole or in part, by an insured peril or otherwise,
and if no Event of Default shall have occurred and be continuing, then
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Seller may, upon written notice to Boeing, settle, adjust, or
compromise any all such loss or damage not in excess of Two Hundred
Fifty Thousand Dollars ($250,000) in any one occurrence and Five
Hundred Thousand Dollars ($500,000) in the aggregate. Seller may
settle, adjust or compromise any other claim by Seller only after
Boeing has given written approval, which approval shall not be
unreasonably withheld.
28.0 RESPONSIBILITY FOR PERFORMANCE
Seller shall be responsible for the requirements of this Agreement and
any Order referencing this Agreement. Seller shall bear all risks of
providing adequate facilities and equipment to perform each Order in
accordance with the terms thereof. Seller shall include as part of
its subcontracts those elements of the Agreement which protect
Boeing's rights including but not limited to right of entry
provisions, proprietary information and rights provisions and quality
control provisions. In addition, Seller shall provide to its
subcontractors sufficient information to clearly document that the
work being performed by Seller's subcontractor is to facilitate
performance under this Agreement or any Order. Sufficient information
may include but is not limited to Order number, GTA number or the name
of Boeing's Material Representative. No subcontracting by Seller
shall relieve Seller of its obligation under the applicable Order.
28.1 SUBCONTRACTING
Seller may not procure any Product, as defined in the applicable
Order, from a third party in a completed or a substantially completed
form without Boeing's prior written consent.
Where required by the requirements of the Order, no raw material
and/or material process may be incorporated in a Product unless:
(a) Seller uses an approved source or (b) Boeing has surveyed and
qualified Seller's receiving inspection personnel and laboratories to
test the specified raw materials and/or material process. No waiver
of survey and qualification requirements will be effective unless
granted by Boeing's Engineering and Quality Control Departments.
Utilization of a Boeing-approved raw material source does not
constitute a waiver of Seller's responsibility to meet all
specification requirements.
28.2: RELIANCE
Boeing entering into this Agreement is in part based upon Boeing's
reliance on Seller's ability, expertise and awareness of the intended
use of the Products. Seller agrees that Boeing and Boeing's customers
may rely on Seller as an expert, and Seller will not deny any
responsibility or obligation hereunder to Boeing or Boeing's customers
on the grounds that Boeing or Boeing's customers provided
recommendations or assistance in any phase of the work involved in
producing or supporting the Products, including but not limited to
Boeing's acceptance of specifications, test data or the Products.
28.3 ASSIGNMENT
Each Order shall inure to the benefit of and be binding on each of the
parties hereto and their respective successors and assigns, provided
however, that no assignment of any rights or delegation of any duties
under such Order is binding on Boeing unless Boeing's written consent
has first been obtained. Notwithstanding the above, Seller may assign
claims for monies due or to become due under any Order provided that
Boeing may recoup or setoff any amounts covered by any such assignment
against any indebtedness of Seller to Boeing, whether arising before
or after the date of the assignment or the date of this Agreement, and
whether arising out of any such Order or any other agreement between
the parties.
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Boeing may settle all claims arising out of any Order, including
termination claims, directly with Seller. Boeing may unilaterally
assign any rights or title to property, under the Order to any
wholly-owned subsidiary of The Boeing Company.
29.0 NON-WAIVER
Boeing's failure at any time to enforce any provision of an Order does
not constitute a waiver of such provision or prejudice Boeing's right
to enforce such provision at any subsequent time.
30.0 HEADINGS
Section and Section headings used in this Agreement are for convenient
reference only and do not affect the interpretation of the Agreement.
31.0 PARTIAL INVALIDITY
If any provision of any Order is or becomes void or unenforceable by
force or operation of law, the other provisions shall remain valid and
enforceable.
32.0 APPLICABLE LAW, JURISDICTION
Each Order, including all matters of construction, validity and
performance, shall in all respects be governed by, and construed and
enforced in accordance with, the law as set forth in SBP Section 5.0.
33.0 AMENDMENT
Oral statements and understandings are not valid or binding. Except
as otherwise provided in GTA Section 12.0 and SBP Section 10.0, no
Order may be changed or modified except by a writing signed by Seller
and Boeing's Material Representative.
34.0 LIMITATION
Seller may not (except to provide an inventory of Products to support
delivery acceleration and to satisfy reasonable replacement and Spares
requirements) manufacture or fabricate Products or procure any goods
in advance of the reasonable flow time required to comply with the
delivery schedule in the applicable Order. Notwithstanding any other
provision of an Order, Seller is not entitled to any equitable
adjustment or other modification of such Order for any manufacture,
fabrication, or procurement of Products not in conformity with the
requirements of the Order, unless Boeing's written consent has first
been obtained. Nothing in this Section 34.0 shall be construed as
relieving Seller of any of its obligations under the Order.
35.0 TAXES
35.1 INCLUSION OF TAXES IN PRICE
All taxes, including but not limited to federal, state and local
income taxes, value added taxes, gross receipt taxes, property taxes,
and custom duties taxes are deemed to be included in the Order price,
except applicable sales or use taxes on sales to Boeing ("Sales
Taxes") for which Boeing has not supplied a valid exemption
certificate or unless otherwise indicated on the applicable Order.
35.2 LITIGATION
In the event that any taxing authority has claimed or does claim
payment for Sales Taxes, Seller shall promptly notify Boeing, and
Seller shall take such action as Boeing may direct to pay or protest
such taxes or to defend against such claim. The actual and direct
expenses, without the addition of profit and overhead, of such defense
and the amount of such taxes as ultimately determined as due and
payable shall be paid directly by Boeing or reimbursed to Seller. If
Seller or Boeing is successful in defending such claim, the amount of
such taxes recovered by Seller, which had previously been paid by
Seller and reimbursed by Boeing or paid directly by Boeing, shall be
immediately refunded to Boeing.
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35.3 REBATES
If any taxes paid by Boeing are subject to rebate or reimbursement,
Seller shall take the necessary actions to secure such rebates or
reimbursement and shall promptly refund to Boeing any amount
recovered.
36.0 FOREIGN PROCUREMENT OFFSET
With respect to work covered by the Order, Seller shall use its best
efforts to cooperate with Boeing in the fulfillment of any foreign
offset program obligation that Boeing may have accepted as a condition
of the sale of Boeing's products. In the event that Seller solicits
bids or proposals for, or procures or offers to procure any goods or
services relating to the work covered by an Order from any source
outside of the United States, Boeing shall be entitled, to the
exclusion of all others, to all industrial benefits and other "offset"
credits which may result from such solicitations, procurements or
offers to procure. Seller agrees to take any actions that may be
required on its part to assure that Boeing receives such credits.
37.0 ENTIRE AGREEMENT/ORDER OF PRECEDENCE
37.1 ENTIRE AGREEMENT
The Order sets forth the entire agreement, and supersedes any and all
other prior agreements, understandings and communications between
Boeing and Seller related to the subject matter of an Order. The
rights and remedies afforded to Boeing or Customers pursuant to any
provisions of an Order are in addition to any other rights and
remedies afforded by any other provisions of this Order, by law or
otherwise.
37.2 INCORPORATED BY REFERENCE
In addition to the documents previously incorporated herein by
reference, the documents listed below are by this reference made a
part of this Agreement:
A. Engineering Drawing by Part Number and Related Outside Production
Specification Plan (OPSP).
B. Any other exhibits or documents agreed to by the parties to be a
part of this Agreement.
37.3 ORDER OF PRECEDENCE
In the event of a conflict or inconsistency between any of the terms
of the following documents, the following order of precedence shall
control:
A. SBP (excluding the Administrative Agreement identified in E below)
B. This General Terms Agreement (excluding the documents identified
in D and F below)
C. Order (excluding the documents identified in A and B above)
D. Engineering Drawing by Part Number and, if applicable, related
Outside Production Specification Plan (OPSP).
E. Administrative Agreement (If Applicable)
F. Any other exhibits or documents the parties agree shall be part
of the Agreement.
KAYNAR TECH BCAG CONTRACT 07-01-95 19 BCA-65751-029
<PAGE>
37.4 DISCLAIMER
Unless otherwise specified on the face of the applicable Order, any
CATIA Dataset or translation thereof (each or collectively "Data")
furnished by Boeing is furnished as an accommodation to Seller. It is
the Seller's responsibility to compare such Data to the comparable two
dimensional computer aided design drawing to confirm the accuracy of
the Data.
BOEING HEREBY DISCLAIMS, AND SELLER HEREBY WAIVES, ALL WARRANTIES AND
LIABILITIES OF BOEING AND ALL CLAIMS AND REMEDIES OF SELLER, EXPRESS
OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY DEFECT IN
ANY CATIA DATASET OR TRANSLATION THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY (A) IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR
USE OR FOR A PARTICULAR PURPOSE, (B) ANY IMPLIED WARRANTY ARISING FROM
COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE, (C) RECOVERY BASED
UPON TORT, WHETHER OR NOT ARISING FROM BOEING'S NEGLIGENCE, AND (D) ANY
RECOVERY BASED UPON DAMAGED PROPERTY, OR OTHERWISE BASED UPON DAMAGED
PROPERTY, OR OTHERWISE BASED UPON LOSS OF USE OR PROFIT OR OTHER
INCIDENTAL OR CONSEQUENTIAL DAMAGES.
EXECUTED in duplicate as of the date and year first written above by the duly
authorized representatives of the parties.
THE BOEING COMPANY KAYNAR TECHNOLOGIES INCORPORATED
by and through its division
Boeing Commercial Airplane Group
/s/ Hugh McCormick /s/ Robert L. Beers
Name: Hugh N. McCormick Name: Robert L. Beers
Title: Buyer Title: Vice President Sales and
Marketing
Date: September 16, 1996 Date: 9-20-96
KAYNAR TECH BCAG CONTRACT 07-01-95 20 BCA-65751-029
<PAGE>
SPECIAL BUSINESS PROVISIONS
SPECIAL BUSINESS PROVISIONS
between
THE BOEING COMPANY
and
KAYNAR TECHNOLOGIES INCORPORATED
Number STD-65751-025
-------------
i
<PAGE>
SPECIAL BUSINESS PROVISIONS
TABLE OF CONTENTS
Section Item
- ------- ----
1.0 DEFINITIONS
2.0 PURCHASE ORDER NOTE
3.0 PRICES
3.1 Product Pricing
3.2 Manufacturing Configuration Baseline
3.3 Packaging
4.0 GOVERNING QUALITY ASSURANCE REQUIREMENT
5.0 APPLICABLE LAW JURISDICTION
6.0 PRODUCT ASSURANCE
6.1 Governing Document
7.0 PAYMENT
7.1 Recurring Price
7.2 Non-Recurring Price/Special Charges
8.0 ACCELERATION/DECELERATION AT NO COST
9.0 NOTICES
9.1 Addresses
10.0 OBLIGATION TO PURCHASE AND SELL
11.0 COST AND FINANCIAL PERFORMANCE VISIBILITY
12.0 CHANGES
12.1 Changes to the Statement of Work
12.2 Computation of Equitable Adjustment
12.3 Obsolescence
12.4 Change Absorption
12.5 Planning Schedule
12.6 Value Engineering
12.7 Reduction in Quantity to be Delivered
13.0 SPARES AND OTHER PRICING
13.1 Spares
13.2 Short Flow Production Requirements
13.3 Tooling
ii
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SPECIAL BUSINESS PROVISIONS
TABLE OF CONTENTS
Section Item
- ------- ----
13.4 Pricing of Boeing's Supporting Requirements
13.5 Pricing of Requirements for Modification or Retrofit
13.6 Similar Pricing
14.0 STATUS REPORTS/REVIEWS
15.0 PROVISIONS FOR OFFSET/BUSINESS STRATEGIES FOREIGN
PROCUREMENT REPORT
16.0 BOEING FURNISHED MATERIAL
17.0 ASSIGNMENT
Attachment 1, 1A Work Statement and Pricing
Attachment 2 Foreign Procurement Report
Attachment 3 Rates and Factors
Attachment 4 Boeing AOG Coverage
Attachment 5 Boeing AOG/Critical
Shipping Notification
Attachment 6 Economic Price Adjustment for Titanium
Seal Nuts
iii
<PAGE>
SPECIAL BUSINESS PROVISIONS
AMENDMENTS
AMEND
NUMBER DESCRIPTION DATE APPROVAL
- ------ ----------- ---- --------
1 Add BACN10JS part family to 12/3/96 see original
Attachment 1, page 1 and 2.
2 Correct pricing to reflect 4 12/9/96 see original
decimal places.
3 Add exhibit 1A and 6 for TN 1/17/97
pricing.
Add escalation for Attachment
1A to section 3.1.
Modify section 10.0 to denote
percent of requirements
purchased for Attachment 1A.
Modify sections: 3.1, 3.2, 3.3,
7.2, 10.0, 12.6.3, 13.1.3,
13.1.3.1, 13.1.3.2, 13.4, 13.5,
and 17.0 to include Attachment 1A.
iv
<PAGE>
SPECIAL BUSINESS PROVISIONS
SPECIAL BUSINESS PROVISIONS
THESE SPECIAL BUSINESS PROVISIONS are entered into as of September 20, 1996 by
and between Kaynar Technologies Incorporated, a California corporation with its
principal office in Fullerton, California ("Seller"), and The Boeing Company, a
Delaware corporation with an office in Seattle, Washington acting by and through
its division the Boeing Commercial Airplane Group ("Boeing").
RECITALS
--------
A. Boeing and Seller entered into a General Terms Agreement GTA #
BCA-65751-029 dated September 20, 1996, (the "Agreement") which is
incorporated herein and made a part hereof by this reference, for the sale
by Seller and purchase by Boeing of Products.
B. Boeing and Seller desire to include these special business provisions
("SBP") relating to the sale by Seller and purchase by Boeing of Products.
Now, therefore, in consideration of the mutual covenants set forth herein, the
parties agree as follows:
PROVISIONS
1.0 DEFINITIONS
The definitions used herein shall be the same as used in the Agreement.
2.0 PURCHASE ORDER NOTE
The following note shall be contained in any Order to which these SBP are
applicable:
This Order is subject to and incorporates by this reference SBP
STD-65751-025 between The Boeing Company and Kaynar Technologies
Incorporated dated September 20, 1996.
Each Order bearing such note shall be governed by and be deemed to include
the provisions of these SBP.
3.0 PRICES
3.1 PRODUCT PRICING
The prices and applicable period of performance of Products scheduled for
delivery under this SBP are set forth in Attachment 1 and 1A. Prices are
in United States dollars, F.O.B. Fullerton, California. Prices for
Products in Attachment 1A shall be subject to escalation as set forth in
Attachment 6.
1
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SPECIAL BUSINESS PROVISIONS
3.2 MANUFACTURING CONFIGURATION BASELINE
Unit pricing for each Product or part number shown in Attachment 1 and 1A
are based on the latest revisions of the engineering drawings or
specifications at the time of the signing of this SBP.
3.3 PACKAGING
The prices shown in Attachment 1 and 1A include packaging costs and all
materials and labor required to package Products identified in Attachment 1
and 1A. Packaging shall be furnished by the Seller in accordance with
Document M6-1025, Volume II, "Supplier Part Protection Guide", Document
D200-10038-2 "Supplier Packaging Requirements", or in accordance with
instructions specified on individual Order as applicable. In the case of
Products to be shipped directly to Customers, A.T.A. Specification 300
"Specification for Packaging of Airline Supplies" shall apply unless
otherwise directed by Boeing. Bulk packaging is acceptable for Products
shown on Attachment 1A.
4.0 GOVERNING QUALITY ASSURANCE REQUIREMENT
All work performed under this SBP shall be in accordance with the following
document which is incorporated herein and made a part hereof by this
reference:
Document D1-9000, "Advanced Quality System for Boeing Suppliers," as
amended from time to time.
5.0 APPLICABLE LAW JURISDICTION
Each Order, including all matters of construction, validity and
performance, shall in all respects be governed by, and construed and
enforced in accordance only with the law of the State of Washington as
applicable to contracts entered into and to be performed wholly within such
State between citizens of such State, without reference to any rules
governing conflicts of law. Seller hereby irrevocably consents to and
submits itself exclusively to the jurisdiction of the applicable courts of
the State and the federal courts therein for the purpose of any suit,
action or other judicial proceeding arising out of or connected with any
Order or the performance or subject matter thereof. Seller hereby waives
and agrees not to assert by way of motion, as a defense, or otherwise, in
any such suit, action or proceeding, any claim that (a) Seller is not
personally subject to the jurisdiction of the above-named courts, (b) the
suit, action or proceeding is brought in an inconvenient forum or (c) the
venue of the suit, action or proceeding is improper.
6.0 PRODUCT ASSURANCE
6.1 GOVERNING DOCUMENT
Seller acknowledges that Boeing and Customers must be able to rely on each
Product performing as specified and that Seller will provide all required
support. Accordingly, the following provisions and document(s) are
incorporated herein and made a part hereof:
Seller warrants to Boeing and Customers that Products shall: (a) conform
in all respects to all the requirements of the Order; (b) be free from all
defects in materials and workmanship; and (c) to the extent not
manufactured pursuant to detailed designs furnished by Boeing, be free from
all defects in design and be fit for the intended purposes.
2
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SPECIAL BUSINESS PROVISIONS
7.0 PAYMENT
7.1 RECURRING PRICE
Unless otherwise provided in the applicable Order, payment of the recurring
price shall be made in accordance with Form X-27981 "Pay From Receipt -
Additional Terms and Conditions Regarding Invoicing and Payment". Payment
terms shall be net thirty (30) days except as otherwise agreed to by the
parties. All payments are subject to adjustment for shortages, credits and
rejections.
7.2 NON-RECURRING PRICE/SPECIAL CHARGES
Unless otherwise provided in the applicable Order, any non-recurring price
payable by Boeing under Attachment 1 or 1A shall be paid within the term
discount period or thirty (30) calendar days (whichever is later) after
receipt by Boeing of both acceptable Products and a correct invoice.
8.0 ACCELERATION/DECELERATION AT NO COST
Notwithstanding GTA Section 10.0, Boeing may make changes in the delivery
schedule without additional cost or change to the unit price stated in the
applicable Order if (a) the delivery date of the Product under such Order
is on or before the last date of contract, if applicable, and (b) Boeing
provides Seller with written notice of such changes.
9.0 NOTICES
9.1 ADDRESSES
Notices and other communications shall be given in writing by personal
delivery, United States mail, telex, teletype, telegram, facsimile, cable
or electronic transmission addressed to the respective party as follows:
To Boeing: Attention: Buyer: Hugh McCormick, M/S 38-FW
BOEING COMMERCIAL AIRPLANE GROUP
MATERIEL DIVISION
P.O. Box 3707
Seattle, Washington 98124-2207
To Seller: Attention: Paula Smith
KAYNAR TECHNOLOGIES INCORPORATED
800 S. State Collage Blvd.
Fullerton, CA 92634-3001
3
<PAGE>
SPECIAL BUSINESS PROVISIONS
10.0 OBLIGATION TO PURCHASE AND SELL
Boeing and Seller agree that in consideration of the prices set forth
under Attachment 1 and 1A, Boeing shall issue Orders for Products from
time to time to Seller for Boeing's requirements. *
A. *
B. *
C. *
D. *
E. *
11.0 COST AND FINANCIAL PERFORMANCE VISIBILITY
Seller shall provide all necessary cost support data, source documents
for direct and indirect costs, and assistance at the Seller's facility
for cost performance reviews performed by Boeing pursuant to any Order.
Furthermore, Seller shall provide financial data, on a quarterly basis,
or as requested, to Boeing's Credit Office and Materiel Representative
for credit and financial condition reviews. Said data shall include
but not be limited to balance sheets, schedule of accounts payable and
receivable, major lines of credit, creditors, income statements (profit
and loss), cash flow statements, firm backlog, and headcounts. Copies
of such data are to be made available within 72 hours of any written
request by Boeing. This data is required in addition to the cost data
provided pursuant to GTA Section 9.0. All such information shall be
treated as confidential in accordance with GTA Section 20.0.
* Confidential portions omitted and filed separately with the Commission.
4
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.0 CHANGES
12.1 CHANGES TO THE STATEMENT OF WORK
Boeing may direct Seller within the scope of the applicable Order and
in accordance with the provisions of GTA Section 10.0, to increase or
decrease the work to be performed by the Seller in the manufacture of
any Product.
12.2 COMPUTATION OF EQUITABLE ADJUSTMENT
NOT APPLICABLE
12.3 OBSOLESCENCE
Claims for obsolete or surplus material and work-in-process created by
change orders issued pursuant to this Section shall be subject to the
procedures set forth in GTA Section 12.0, except that Seller may not
submit a claim for obsolete or surplus material resulting from an
individual change order that has a total claim value of Twenty-Five
Hundred Dollars ($2500.00) or less. Payment for obsolete or surplus
materials shall be made by check deposited as first class mail to the
address designated by Seller in SBP Section 9.1. Payment will be made
on the tenth (10th) day of the month following the month of the
obsolescence claim settlement.
12.4 CHANGE ABSORPTION
12.4.1 NON-RECURRING AND RECURRING CHANGE ABSORPTION
NOT APPLICABLE
12.5 PLANNING SCHEDULE
Any planning schedule or quantity estimate provided by Boeing shall
be used solely for production planning. Boeing may purchase Products
in different quantities and specify different delivery dates as
necessary to meet Boeing's requirements. Such planning schedule and
quantity estimate shall be subject to adjustment from time to time.
Any such adjustment is not a change under GTA Section 10.0.
12.6 VALUE ENGINEERING
Seller may from time to time submit proposals to Boeing to change
drawings, designs, specifications or other requirements that:
a. decrease Seller's performance costs; or
b. produce a net reduction in the cost to Boeing of installation,
operation, maintenance or production of the Product.
Provided, that such change shall not impair any essential functions
or characteristics of the Products or Tooling.
5
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.6.1 SUBMISSION OF PROPOSAL
Proposals shall be submitted to Boeing's Materiel Representative.
Boeing shall not be liable for any delay in acting upon a proposal.
Boeing's decision to accept or reject any proposal shall be final.
If there is a delay and the net result in savings no longer justifies
the investment, Seller will not be obligated to proceed with the
change. Seller has the right to withdraw, in whole or in part, any
proposal not accepted by Boeing within the time period specified in
the proposal. Seller shall submit, as a minimum, the following
information with the proposal:
a. description of the difference between the existing requirement
and the proposed change, and the comparative advantages and
disadvantages of each;
b. the specific requirements which must be changed if the proposal is
adopted;
c. the cost savings and Seller's implementation costs;
d. Each proposal shall include the need dates for engineering release
and the time by which a proposal must be approved so as to obtain
the maximum cost reduction.
12.6.2 ACCEPTANCE AND COST SHARING
Boeing may accept, in whole or in part, any proposal by issuing a
change order. Until such change has been issued, Seller shall remain
obligated to perform in accordance with the terms and requirements of
the original Order as written. Boeing and Seller shall share the
savings as follows:
* savings to Boeing;
* savings to Seller.
Seller shall include with each proposal verifiable cost records and
other data as required by Boeing for proposal review and analysis.
Each party shall be responsible for its own implementation costs,
including but not limited to non-recurring costs.
12.6.3 COST SAVINGS COMPUTATION
A change order shall be issued by Boeing and the unit price shall be
reduced in an amount equal to the savings portion attributable to
Boeing as set forth above. The applicable unit price as set forth in
Attachment 1 or 1A Statement of Work shall be amended to reflect such
change.
EXAMPLE:
Current Price: $600.00
Proposed Cost Savings: $100.00/unit
Boeing's Percentage: *
Seller's Percentage: *
* Confidential portions omitted and filed separately with the Commission.
6
<PAGE>
SPECIAL BUSINESS PROVISIONS
12.6.3 COST SAVINGS COMPUTATION (Continued)
STEP BY STEP COMPUTATION:
1. $100.00 unit savings x * Boeing's percentage of savings = *
Boeing savings.
2. $100.00 unit savings x * Seller's percentage of savings = *
Seller savings.
3. Net affect to the unit cost = *
New Unit Price For Units = *
12.6.4 WEIGHT REDUCTION PROPOSALS
Seller is encouraged to submit proposals to Boeing that reduce the
Product's weight without impairing any essential functions or
characteristics of the Product.
Seller shall submit such proposals in accordance with SBP Section
12.6.1 above. The amount of any costs or savings that result from a
weight reduction proposal shall be agreed by Boeing and Seller.
Seller shall include with each proposal verifiable cost records and
other data as required by Boeing for proposal review and analysis.
Boeing may accept in whole or in part, any such proposal by issuing a
change order to the applicable Order.
12.7 REDUCTION IN QUANTITY TO BE DELIVERED
NOT APPLICABLE
13.0 SPARES AND OTHER PRICING
13.1 SPARES
For purposes of this Section, the following definitions shall apply:
A. AIRCRAFT ON GROUND (AOG) - means the highest Spares priority.
Seller will expend best efforts to provide the earliest possible
delivery of any Spare designated AOG by Boeing. Such effort
includes but is not limited to working twenty-four (24) hours a
day, seven days a week and use of premium transportation. Seller
shall specify the delivery date and time of any such AOG Spare
within two (2) hours of receipt of an AOG Spare request.
B. CRITICAL - means an imminent AOG work stoppage. Seller will expend
best efforts to provide the earliest possible delivery of any
Spare designated Critical by Boeing. Such effort includes but is
not limited to working two (2) shifts a day, five (5) days a week
and use of premium transportation. Seller shall specify the
delivery date and time of any such Critical Spare within the same
working day of receipt of a Critical Spare request.
* Confidential portions omitted and filed separately with the Commission.
7
<PAGE>
SPECIAL BUSINESS PROVISIONS
13.1 SPARES (Continued)
C. EXPEDITE (CLASS I) - means a Spare required in less than Seller's
normal lead-time. Seller will expend best efforts to meet the
requested delivery date. Such effort includes but is not limited
to working overtime and use of premium transportation.
D. ROUTINE (CLASS III) - means a Spare required in Seller's normal
lead-time.
E. POA REQUIREMENT (POA) - means any detail component needed to
replace a component on an End Item Assembly currently in Boeing's
assembly line process. Seller shall expend best efforts feasible
to provide the earliest possible delivery of any Spare designated
as POA by Boeing. Such effort includes but is not limited to
working twenty-four (24) hours a day, seven days a week and use
of premium transportation. Seller shall specify the delivery date
and time of any such POA within two (2) hours of an AOG Spare
request.
F. IN-PRODUCTION - means any Spare with a designation of AOG, Critical,
Expedite, Routine, POA or End Item Assembly which is in the
current engineering configuration for the Product and is used on
a model aircraft currently being manufactured by Boeing.
G. NON-PRODUCTION REQUIREMENTS - means any Spare with a designation of
AOG, Critical, Expedite and Routine requirements which is used on
model aircraft no longer being manufactured by Boeing (Post
Production) or is in a non-current engineering configuration for
the Product (Out of Production).
H. BOEING PROPRIETARY SPARE - means any Spare which is manufactured
(i) by Boeing, or (ii) to Boeing's detailed designs with Boeing's
authorization or (iii) in whole or in part using Boeing's
Proprietary Materials.
13.1.1 SPARES SUPPORT
Seller shall provide Boeing with a written Spares support process
describing Seller's plan for supporting AOG and Critical commitments
and manufacturing support. The process must provide Boeing with the
name and number of a twenty-four (24) hour contact for coordination
of AOG and Critical requirements. Such contact shall be equivalent
to the coverage provided by Boeing to its Customers as outlined in
Attachment 4 "Boeing AOG Coverage" which is incorporated herein and
made a part hereof by this reference.
Seller shall notify Boeing as soon as possible via fax, telecon, or
as otherwise agreed to by the parties of each AOG and Critical
requirement shipment using the force identified in Attachment 5
"Boeing AOG and Critical Shipping Notification". Such notification
shall include time and date shipped, quantity shipped, Order,
pack slip, method of transportation and air bill if applicable.
Seller shall also notify Boeing immediately upon the discovery of
any delays in shipment of any requirement and identify the
earliest revised shipment possible.
8
<PAGE>
SPECIAL BUSINESS PROVISIONS
13.1.2 RECLASSIFICATION OR RE-EXERCISES
Boeing may on occasion, instruct Seller to re-prioritize or
reclassify an existing requirement in order to improve or otherwise
change the established shipping schedule. Seller shall expend the
effort required to meet the revised requirement as set forth above in
the definitions of the requirements. Seller's commitment of a
delivery schedule shall be given in accordance with that set forth
above for the applicable classification but in no case shall it
exceed twenty-four (24) hours from notification by Boeing.
13.1.3 SPARE PRICING
Except as set forth in subsections 13.1.3.1 and 13.1.3.2 below, the
price for Spare(s) shall *.
13.1.3.1 AIRCRAFT ON GROUND (AOG), CRITICAL SPARES AND POA REQUIREMENT
The price for AOG and Critical Spares and POA requirements shall be
the price for such Products listed on Attachment 1 or 1A.
13.1.3.2 EXPEDITE SPARE (CLASS 1)
The price for Expedite Spares shall be the price for such Products
listed on Attachment 1 and 1A.
13.1.4 SPECIAL HANDLING
The price for all effort associated with the handling and delivery of
Spare(s) is deemed to be included in the price for such Spare(s).
Provided, that if Boeing directs delivery of Spares to an F.O.B.
point other than Seller's plant, Boeing shall reimburse Seller for
shipping charges, including insurance, paid by Seller from the plant
to the designated F.O.B. point. Such charges shall be shown
separately on all invoices.
13.2 SHORT FLOW PRODUCTION REQUIREMENTS
Boeing shall pay no expedite charges for production requirements
released less than Seller's current ROLT. Seller agrees to support
Boeing's short flow requirements with its best effort.
* Confidential portions omitted and filed separately with the Commission.
9
<PAGE>
SPECIAL BUSINESS PROVISIONS
13.3 TOOLING
13.3.1 RESPONSIBLE PARTY
Seller shall absorb all costs for Tooling manufactured and/or
purchased by Seller necessary for the manufacture and delivery of the
Products including but not limited to rework, repair and maintenance
of the Tooling.
13.3.2 BOEING FURNISHED TOOLING
In the event Boeing furnishes Tooling to Seller to support the
delivery of Product(s), Seller shall comply with the Terms and
Conditions applicable to the Blanket Tooling Purchase Control Order
established with Seller who possess or controls Tooling. No repair,
replacement or rework required shall be performed without Boeing's
prior written consent. Boeing shall notify Seller of, what if any,
action shall be required for all discrepant Tooling.
13.4 PRICING OF BOEING'S SUPPORTING REQUIREMENTS
Any Products required to assist Boeing's supporting requirements,
including but not limited to color and appearance samples, design
studies, product qualification, Boeing-owned simulators, test
requirements, factory support, flight test spares will be provided
for not more than the applicable price as set forth in Attachment 1
or 1A.
13.5 PRICING OF REQUIREMENTS FOR MODIFICATION OR RETROFIT
Any Products required by Boeing to support a modification or retrofit
program shall be provided for *.
13.6 SIMILAR PRICING
New Products ordered by Boeing that are similar to or within Product
families of Products currently being manufactured by Seller shall be
priced *.
14.0 STATUS REPORTS/REVIEWS
When requested by Boeing, Seller shall update and submit, as a
minimum, monthly status reports on data requested by Boeing using a
method mutually agreed upon by Boeing and Seller.
When requested by Boeing, Seller shall provide to Boeing a
manufacturing milestone chart identifying the major purchasing,
planning and manufacturing operations for the applicable Product(s).
Upon request by Boeing, a program review may be held between the
parties. The location of such review shall be mutually agreed to by
the parties. The purpose of the review is to improve communication
and understanding between the parties to ensure program success.
* Confidential portions omitted and filed separately with the Commission.
10
<PAGE>
SPECIAL BUSINESS PROVISIONS
15.0 PROVISIONS FOR OFFSET/BUSINESS STRATEGIES FOREIGN PROCUREMENT REPORT
Seller agrees to cooperate with Boeing in identifying possible
subcontractors for work under any Order that support Boeing's offset
or business strategies. Prior to releasing any request for proposal
to a subcontractor to support Boeing's offset or business strategy,
Seller shall coordinate with Boeing.
Seller shall document on Attachment 2 all offers to contract and
executed contracts with such subcontractors including the dollars
contracted. Seller shall provide to Boeing with an updated copy of
Attachment 2 for the six-month periods ending June 30 and December 31
of each year. The reports shall be submitted on the 1st of August
and the 1st of February respectively.
16.0 BOEING FURNISHED MATERIAL
NOT APPLICABLE
17.0 ASSIGNMENT
Boeing and Seller agree that Boeing may, in its discretion, assign,
in part or in whole, its purchasing obligations under the Agreement
or any Order, as applicable, at the prices set forth in Attachment 1
and 1A thereof. Boeing reserves the right to rescind its assignment
at anytime.
Boeing's assignment of purchasing obligation includes scheduling,
issuance of Order(s), receival and inspection of Products, acceptance
or rejection of Products, payment for accepted Products, and ensuring
conformance to the quality assurance system requirements.
Boeing shall retain all other rights and obligations pursuant to the
applicable terms and conditions. In addition, Boeing reserves the
right, where necessary, to coordinate with and mediate between Seller
and any assignee regarding such assignment.
EXECUTED in duplicate as of the date and year first set forth above by the duly
authorized representatives of the parties.
THE BOEING COMPANY KAYNAR TECHNOLOGIES
By and Through its Division INCORPORATED
Boeing Commercial Airplane Group
/s/ Hugh N. McCormick /s/ Robert L. Beers
Name: Hugh N. McCormick Name: Robert L. Beers
Title: Buyer Title: Vice President Sales and Marketing
Date: January 20, 1997 Date: January 23, 1997
---------------- ----------------
11
<PAGE>
SPECIAL BUSINESS PROVISIONS
ATTACHMENT 1A TO
SPECIAL BUSINESS PROVISIONS
WORK STATEMENT AND PRICING
All Items listed on attachment 1A are titanium seal nuts.
The Re-order lead time (ROLT) for all items is expressed in weeks.
Tolerances applicable to Orders placed under this contract are +1% -1% of the
total Order quantity.
The price for Products to be delivered on or before 12-31-2000, shall be as
follows:
Item # PART NUMBER UNIT PRICE LEAD TIME
- -----------------------------------------------------------------------------
1
2 *
3
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
SPECIAL BUSINESS PROVISIONS
ATTACHMENT 6 TO
SPECIAL BUSINESS PROVISIONS
ECONOMIC PRICE ADJUSTMENT FOR TITANIUM SEAL NUTS
1997 THROUGH 2000
1. This clause sets forth the method for adjusting base prices as a result of
abnormal escalation for 1997 through 2000 provided that:
A. An abnormal price increase shall be made to the base unit price only
if the actual cumulative index exceeds the baseline cumulative
forecast as defined in paragraph 5.B below.
B. An abnormal price decrease shall be made to the base unit price only
if the actual cumulative index is less than baseline cumulative
forecast as defined in paragraph 5.C. below.
2. Adjustment will be determined by the following index:
A. MATERIAL - Producer Price Index (PPI) Titanium Mill Shapes, Code
P102505 as reported by the U.S. Bureau of Labor Statistics.
B. CONTENT - Material content shall be * of the Contract unit prices
listed in Attachment 1.
3. Baseline price is defined as the unit prices in Attachment 1A to the
Special Business Provisions.
4. SPECIAL NOTES:
In the event the U.S. Bureau of Labor Statistics discontinues or alters its
current method of calculating the index specified above, both parties shall
agree upon an appropriate substitution for or adjustment of the indices to
be employed herein.
* Confidential portions omitted and filed separately with the Commission.
1
<PAGE>
SPECIAL BUSINESS PROVISIONS
5. BASELINE FORECAST:
A. The cum baseline forecast is developed from the actual December 1996
index with an annual forecast through December 1999 as follows:
12/96 12/97 12/98 12/99
Code 102505 *
Composite Rate (+/-) *
Therefore, the cumulative baseline band is as follows:
B. ESCALATION INCREASE
12/96 12/97 12/98 12/99
Max *
C. ESCALATION DECREASE
12/96 12/97 12/98 12/99
Min *
6. CALCULATION OF ADJUSTMENT ABNORMAL ESCALATION
The general equation for the calculation of a price change for 1998 shall
be:
A = *
Where CA = *
A = Adjusted Price
B = Base Price
CA = Cum Actuals
CB = Cum Baseline for December for the year preceding the re-price year as
defined in 5B. & 5C.
M1 = PPI Code P102505 - Actual index for the month of December of the year
preceding the re-price year.
* Confidential portions omitted and filed separately with the Commission.
2
<PAGE>
SPECIAL BUSINESS PROVISIONS
7. ABNORMAL ESCALATION INCREASE EXAMPLE:
If the actual indices are as noted below, the calculation of the 1999 price
would be established by simply multiplying the base price by the ratio of
the 1998 actual cum rate to the corresponding 1998 cum baseline rate.
12/96 12/97 12/98 12/99
Code P102505
Percent Change *
Cum Actuals
Cum Baseline
Example:
1999 Price = *
If the base price = *
Then base material, = *
base non-material = *
= *
= *
= *
Then the 1999 Price = *
8. ABNORMAL ESCALATION DECREASE EXAMPLE
If the actual indices are as noted below, the calculation of the 1999 price
would be:
12/96 12/97 12/98 12/99
Code P102505
Percent Change *
Cum Actuals
Cum Baseline
Example:
1999 Price = *
If the base price = *
Then base material, = *
base non-material = *
= *
= *
= *
Then the 1999 Price = *
* Confidential portions omitted and filed separately with the Commission.
3
<PAGE>
SPECIAL BUSINESS PROVISIONS
9. Assuming a price adjustment occurs for either 1998 or 1999, and the
succeeding year's actual index line returns within the baseline parameters,
as described in paragraphs 5.B and 5.C. above, then the price will also
return to the base price level.
10. The unit prices listed in Attachment 1A to the Special Business Provisions
are firm fixed for quantities ordered in 1997. Therefore, the beginning
base for cumulative abnormal escalation is the actual index for December
1996 and any adjustment from the base prices will begin with the unit
prices for 1998 if the actual cumulative index falls outside the baseline
cumulative forecast band as defined in paragraphs 5.B and C. above.
4
<PAGE>
Exhibit A
6-5751-02-69
Ex. 10.9
SUBJECT: NAS1804, NAS1805, BACN1OHR NUT SERIES
CONTRACT AWARD LETTER OF AGREEMENT
Gentlemen:
The Boeing Commercial Airplane Group, the Buyer, will place orders as noted
in Exhibit B and referred to herein as the Procurement Package, with Kaynar,
Division of Kaynar Technologies, Inc., the Seller. This Letter of Agreement
states the provisions which apply to this Procurement Package and
Subsequently Placed Orders.
All other Boeing Companies, Divisions or Groups and Japan Aircraft Industry
(JAI) may purchase to this Agreement at the same pricing and terms afforded
to the Boeing Commercial Airplane Group.
GENERAL
The Seller agrees to accept Subsequently Placed Orders for unlimited
quantities from Boeing Commercial Airplane Group at the same prices stated in
Exhibit B and under the terms and conditions enclosed for the duration of
this Agreement.
In the event of short flow items, i.e. less than lead time away, the Seller
shall be given the first opportunity to supply such parts at the contract
price. Should the Seller be unable to supply items in quantities and schedule
required, the Buyer reserves the right to purchase such items from other
suppliers.
Supplier shall reserve, at all times, at least five (5) percent of the next
12 months requirements in stock to accommodate short flow requirements.
DURATION
The duration of this agreement will extend from the signature date of this
Letter of Agreement through August 15, 1999. Orders shall be entered with
the Seller lead time away (as defined by Seller) and scheduled for delivery
prior to November 13, 1999. In the event that the Seller fails to deliver
prior to November 14, 1999 as scheduled, such delinquent shipments will
continue to have the pricing and terms of the Procurement Package until
delivery is made.
<PAGE>
Exhibit A
6-5751-02-69
TERMS AND CONDITIONS
The Boeing Commercial Airplane Group Terms and Conditions, form D1 4100 4045,
Rev 5/92, Hill apply to all orders subsequently placed referencing this
Letter of Agreement (see note A52). In the event conflict exists between the
Terms and Conditions and this Letter of Agreement, the latter shall govern.
ADDITIONAL PROVISIONS PER PURCHASE ORDER NOTES
The Buyer and Seller have mutually agreed that the following purchase order
notes will apply to all orders subsequently placed referencing this Letter of
Agreement:
A18 - Seller agrees not to make any change in materials or design details
which would affect the part or any component part thereof with regard to (A)
part number identification, (B) physical or functional changeability, and (C)
repair and overhaul procedures and processes and material changes which
affect these procedures without prior written approval of buyer, and without
revising the part numbers and the originals of all drawings or data. (Seller
will place the above clause in all its subcontracts for supplier identified
purchased equipment whether such equipment is supplied to seller as an end
item or as a component part of an end item.)
A47 - The Seller shall at all times, keep adequate books and records relating
to all work under this purchase order. Those records shall include rates and
factors for direct labor (including labor hours), material costs, burden
rates and subcontracts costs. Representatives of Boeing shall be accorded
access to review, analyze and verify these books and records for the purpose
of collecting information for negotiation of prices for future orders, buyer
directed changes and termination claims.
C28 - The pack slip is the document required for receipt/payment processing. In
order to facilitate process of the receipt and subsequent payment, the following
information (when applicable) must be referenced on every pack slip:
1. Suppliers name, address and phone number
2. Boeing purchase order number
3. Date parts shipped
4. Total quantity shipped and quantity in each container
5. Part number shown on the purchase order
6. Bill of Lading (Required on Direct Shipments)
7. Legible pack slip number
<PAGE>
Exhibit A
6-5751-02-69
8. Multiple boxes with same pack slip must reference 1 of 3, 2 of 3,
etc. (if applicable)
9. Pack slip required on the outside of #1 box and inside each
individual box
10. Description/Nomenclature
11. Boeing Purchase Order item number
12. Unit of Measure
13. Sold to and/or ship to as applicable
14. Warranty data and certification data as applicable
15. Rejection tag number if applicable
Q06 - This order is subject to Document D1-8000A. Boeing reserves the right
to conduct surveillance at seller's plant.
Q09 - Seller certifies that material and/or finished parts shall be
controlled and tested in accordance with, and will meet, specified order
requirements, and that applicable records are on file subject to examination.
Seller agrees to furnish certified copies of test and/or control data upon
request from buyer.
Q87 - This order is subject to Document D1-9000. Boeing reserves the right
to conduct surveillance at seller's plant.
S01 - Work under this order is subject to Boeing surveillance at Seller's
plant. Boeing quality control representative may elect to conduct inspection
either on a random basis or to the extent of 100 percent inspection. Seller
will be notified if Boeing inspection is to be conducted on specific
shipments. No shipments are to be held for Boeing inspection unless
notification is received prior to, or at time of, material being ready for
shipment.
S68 - Representatives of the Buyer and/or Federal Aviation Administration (if
non-domestic, equivalent government agency) may inspect and evaluate Seller's
facilities' system, data, equipment, personnel and all completed articles
manufactured for installation on Boeing commercial production airplanes.
B39 - Strict adherence to the purchase order delivery schedule is required.
Immediate written notice of shipment delays must be given by the supplier to
the Boeing buyer.
H57 - Seller agrees that, notwithstanding the provisions of the termination
for convenience clause, any unshipped portion of this order may be terminated
by buyer without any cost, charge or liability to buyer, provided, buyer
notifies seller at least 120 days in advance of the shipping date specified
in the order.
L01 - Reschedule of the order will be at no charge
<PAGE>
Exhibit A
6-5751-02-69
ACCELERATION/DECELERATION NOTE
Purchase order schedule accelerations/decelerations will be at no charge.
PRICING
The pricing applying to the orders making up the Procurement Package and all
Subsequently Placed Orders referencing this Letter of Agreement is as listed
on Exhibit B. This pricing, as listed, will be firm for unlimited quantities
for orders placed from the date of this contract and scheduled for delivery
prior to August 15, 1999.
ACCEPTANCE
This Order is Buyer's offer to Seller, and acceptance is strictly limited to
its terms. Buyer shall not be bound by and specifically objects to any term
or condition whatsoever which is different from, or in addition to, the
provisions of this Agreement. Seller commencement or performance or
acceptance of this Agreement, in any matter, shall conclusively evidence
acceptance unless such term or condition is mutually agreed to by the parties
in writing.
Kaynar, Division of Kaynar Boeing Commercial
Technologies, Inc. Airplane Group
/s/ JORDAN LAW 4-28-94 /s/ KAE FARLEY 4-28-94
- --------------------------- --------------------------
Jordan Law Date Kae Farley Date
President Buyer
--------------------------
G.D. Neely Date
Lead Buyer
--------------------------
E.G. Beals Date
Manager
<PAGE>
EXHIBIT B, 6-5751-02-69
CONTRACT UNIT PRICES
NAS1804 ALLOY NUTS
NAS1805 STAINLESS NUTS
BACN10HR INCONEL NUTS
KAYNAR, DIVISION OF KAYNAR TECHNOLOGIES, INC.
FIVE YEARS - AUGUST 15, 1994 THROUGH AUGUST 15, 1999
- ---- ---- ----------------------------------------------- -----------
P/NS ITEM PART NUMBER UNIT PRICES
- ---- ---- ----------------------------------------------- -----------
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
BACN10, NAS1804, NAS1805 NUT PACKAGE
KAYNAR/BOEING 5-YR CONTRACT
DURATION 4/28/1994 THROUGH 8/15/1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL KAYNAR
KAYNAR EST. QTY EST. QTY EST. QTY EST. QTY EST. QTY ESTIMATED GROUP
P/N PART NO. 12/93-11/94 12/94-11/95 12/95-11/96 12/96-11/97 12/97-11/98 QUANTITY PRICING EACH
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
BACN10, NAS1804, NAS1805 NUT PACKAGE
KAYNAR/BOEING 5-YR CONTRACT
DURATION 4/28/1994 THROUGH 8/15/1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL KAYNAR
KAYNAR EST. QTY EST. QTY EST. QTY EST. QTY EST. QTY ESTIMATED GROUP
P/N PART NO. 12/93-11/94 12/94-11/95 12/95-11/96 12/96-11/97 12/97-11/98 QUANTITY PRICING EACH
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
* Confidential portions omitted and filed separately with the Commission.
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<S> <C>
KAYNAR TECHNOLOGIES INC.
Jurisdiction of Incorporation: Delaware
KAYNAR TECHNOLOGIES LTD.
Jurisdiction of Incorporation: United Kingdom
K.T.I. FEMIPARI KFT
Jurisdiction of Incorporation: Hungary
KAYNAR TECHNOLOGIES INTERNATIONAL SALES CORP.
Jurisdiction of Incorporation: Barbados
RECOIL HOLDINGS, INC.
Jurisdiction of Incorporation: Delaware
RECOIL AUSTRALIA HOLDINGS, INC.
Jurisdiction of Incorporation: Delaware
RECOIL PTY
Jurisdiction of Incorporation: Victoria, Australia
RECOIL (EUROPE) LTD.
Jurisdiction of Incorporation: United Kingdom
RECOIL MARKETING BVBA
Jurisdiction of Incorporation: Belgium
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to all references to our firm and to the use of our reports in
this Registration Statement (Form S-1) and Prospectus.
ARTHUR ANDERSEN LLP
Orange County, California
February 25, 1997
<PAGE>
KAYNAR HOLDINGS INC.
1997 STOCK INCENTIVE PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration and Authorization; Power and Procedure . . . 1
1.3 Participation . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Shares Available for Awards; Share Limits . . . . . . . . . 3
1.5 Grant of Awards . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Award Period. . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Limitations on Exercise and Vesting of Awards . . . . . . . 4
1.8 No Transferability; Limited Exception to
Transfer Restrictions . . . . . . . . . . . . . . . . . . . 5
2. OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Option Price. . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Limitations on Grant and Terms of Incentive
Stock Options . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Limits on 10% Holders . . . . . . . . . . . . . . . . . . . 7
2.5 Option Repricing/Cancellation and Regrant/
Waiver of Restrictions. . . . . . . . . . . . . . . . . . . 7
3. STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . 8
3.1 Grants. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Exercise of Stock Appreciation Rights . . . . . . . . . . . 8
3.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. PERFORMANCE SHARE AWARDS AND STOCK BONUSES . . . . . . . . . . . . 9
4.1 Grants of Performance Share Awards. . . . . . . . . . . . . 9
4.2 Special Performance-Based Share Awards. . . . . . . . . . . 10
4.3 Grants of Stock Bonuses . . . . . . . . . . . . . . . . . . 12
4.4 Deferred Payments . . . . . . . . . . . . . . . . . . . . . 12
5. OTHER PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 Rights of Eligible Persons, Participants and Beneficiaries. 12
5.2 Adjustments; Acceleration . . . . . . . . . . . . . . . . . 13
5.3 Effect of Termination of Employment . . . . . . . . . . . . 14
5.4 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 15
5.5 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Plan Amendment, Termination and Suspension. . . . . . . . . 16
5.7 Privileges of Stock Ownership . . . . . . . . . . . . . . . 16
5.8 Effective Date of the Plan. . . . . . . . . . . . . . . . . 17
5.9 Term of the Plan. . . . . . . . . . . . . . . . . . . . . . 17
5.10 Governing Law/Construction/Severability . . . . . . . . . . 17
5.11 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.12 Effect of Change of Subsidiary Status . . . . . . . . . . . 18
i
<PAGE>
6. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 18
7. NON-EMPLOYEE DIRECTOR OPTIONS. . . . . . . . . . . . . . . . . . . 24
7.1 Participation . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Annual Option Grants. . . . . . . . . . . . . . . . . . . . 24
7.3 Option Price. . . . . . . . . . . . . . . . . . . . . . . . 25
7.4 Option Period and Exercisability. . . . . . . . . . . . . . 25
7.5 Termination of Directorship . . . . . . . . . . . . . . . . 25
7.6 Acceleration and Adjustments. . . . . . . . . . . . . . . . 25
7.7 Acceleration Upon a Change in Control Event . . . . . . . . 25
ii
<PAGE>
KAYNAR HOLDINGS INC.
1997 STOCK INCENTIVE PLAN
1. THE PLAN.
1.1 PURPOSE.
The purpose of this Plan is to promote the success of the Company
by providing an additional means through the grant of Awards to attract,
motivate, retain and reward key employees, including officers, whether or not
directors, of the Company with awards and incentives for high levels of
individual performance and improved financial performance of the Company and to
attract, motivate and retain experienced and knowledgeable independent directors
through the benefits provided under Article 7. "Corporation" means Kaynar
Holdings Inc. and "Company" means the Corporation and its Subsidiaries,
collectively. These terms and other capitalized terms are defined in Article 6.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
(a) COMMITTEE. This Plan shall be administered by and all Awards
to Eligible Persons shall be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by unanimous written consent of its members.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject
to the express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the
particular Eligible Person who will receive any Awards;
(ii) to grant Awards to Eligible Persons, determine the price at
which Securities will be offered or awarded and the amount of securities
to be offered or awarded to any of such persons, and determine other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which
such Awards shall become exercisable or shall vest, or determine that no
delayed exercisability or vesting is required, and establish the events
of termination or reversion of such Awards;
<PAGE>
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of award or among Participants);
(iv) to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and Participants who
are granted Awards under Articles 2, 3, or 4 of this Plan, further define
the terms used in this Plan, and prescribe, amend and rescind rules and
regulations relating to the administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with
respect to, or modify, discontinue, suspend, or terminate any or all
outstanding Awards held by Eligible Persons, subject to any required
consent under Section 5.6;
(vi) to accelerate or extend the exercisability or extend the
term of any or all such outstanding Awards within the maximum ten-year
term of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Article 7 relating to Non-
Employee Director Awards shall be automatic and, to the maximum extent possible,
self-effectuating.
(c) BINDING DETERMINATIONS. Any action taken by, or inaction
of, the Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that entity or
body and shall be conclusive and binding upon all persons. No member of the
Board or Committee, or officer of the Corporation or any Subsidiary, shall be
liable for any such action or inaction of the entity or body, of another person
or, except in circumstances involving bad faith, of himself or herself. Subject
only to compliance with the express provisions hereof, the Board and Committee
may act in their absolute discretion in matters within their authority related
to this Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in
taking or not taking any action under this Plan, the Committee or the Board, as
the case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.
2
<PAGE>
(e) DELEGATION. The Committee may delegate ministerial, non-
discretionary functions to a third-party administrator or to individuals who are
officers or employees of the Company.
1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons that
the Committee determines to be Eligible Persons. An Eligible Person who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Committee shall so determine.
1.4 SHARES AVAILABLE FOR AWARDS; SHARE LIMITS.
(a) SHARES AVAILABLE. Subject to the provisions of Section
5.2, the capital stock that may be delivered under this Plan shall be shares of
the Corporation's authorized but unissued Common Stock and any shares of its
Common Stock held as treasury shares. The shares may be delivered for any
lawful consideration.
(b) SHARE LIMITS. The maximum number of shares of Common Stock
that may be delivered pursuant to Awards (including Incentive Stock Options)
granted to Eligible Persons under this Plan shall not exceed 850,000 shares (the
"SHARE LIMIT"). The maximum number of shares of Common Stock that may be
delivered pursuant to Incentive Stock Options granted to Eligible Employees
shall not exceed [750,000] shares. The maximum number of shares of Common Stock
that may be delivered to Non-Employee Directors under the provisions of Article
7 shall not exceed [50,000] shares. The maximum number of shares subject to
those Options and Stock Appreciation Rights that are granted during any calendar
year to any individual shall be limited to 75,000. Each of the four foregoing
numerical limits shall be subject to adjustment as contemplated by this Section
1.4 and Section 5.2.
(c) SHARE RESERVATION; REPLENISHMENT AND REISSUE OF UNVESTED
AWARDS. No Award may be granted under this Plan unless, on the date of grant,
the sum of (i) the maximum number of shares issuable at any time pursuant to
such Award, plus (ii) the number of shares that have previously been issued
pursuant to Awards granted under this Plan, other than reacquired shares
available for reissue consistent with any applicable legal limitations, plus
(iii) the maximum number of shares that may be issued at any time after such
date of grant pursuant to Awards that are outstanding on such date, does not
exceed the Share Limit. Shares that are subject to or underlie Awards which
expire or for any reason are cancelled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under this Plan, as well
as reacquired shares, shall again, except to the extent prohibited by law,
3
<PAGE>
be available for subsequent Awards under the Plan. Except as limited by law, if
an Award is or may be settled only in cash, such Award need not be counted
against any of the limits under this Section 1.4.
1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the Committee
shall determine the number of shares of Common Stock subject to each Award, the
price (if any) to be paid for the shares or the Award and, in the case of
Performance Share Awards, in addition to matters addressed in Section 1.2(b),
the specific objectives, goals and performance criteria (such as an increase in
sales, market value, earnings or book value over a base period, the years of
service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
Performance Share Award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
The Award Agreement shall set forth the material terms and conditions of the
Award established by the Committee consistent with the specific provisions of
this Plan.
1.6 AWARD PERIOD.
Each Award and all executory rights or obligations under the
related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options or other rights to
acquire Common Stock not later than ten (10) years after the Award Date.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
(a) PROVISIONS FOR EXERCISE. Unless the Committee otherwise
expressly provides, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the Award.
(b) PROCEDURE. Any exercisable Award shall be deemed to be
exercised when the Secretary of the Corporation receives written notice of such
exercise from the Participant, together with any required payment made in
accordance with Section 2.2(a) or 7.4, as the case may be.
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share
interests shall be disregarded, but may be accumulated. The Committee, however,
may determine in the case of Eligible Persons that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any Award
at one time unless the
4
<PAGE>
number purchased is the total number at the time available for purchase under
the Award.
1.8 NO TRANSFERABILITY; LIMITED EXCEPTION TO TRANSFER RESTRICTIONS.
(a) LIMIT ON EXERCISE AND TRANSFER. Unless otherwise expressly
provided in (or pursuant to) this Section 1.8, by applicable law and by the
Award Agreement, as the same may be amended, (i) all Awards are non-transferable
and shall not be subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge; Awards shall be exercised
only by the Participant; and (ii) amounts payable or shares issuable pursuant to
an Award shall be delivered only to (or for the account of) the Participant.
(b) EXCEPTIONS. The Committee may permit Awards to be
exercised by and paid only to certain persons or entities related to the
Participant, including but not limited to members of the Participant's immediate
family, charitable institutions, or trusts or other entities whose beneficiaries
or beneficial owners are members of the Participant's immediate family and/or
charitable institutions, or to such other persons or entities as may be approved
by the Committee, pursuant to such conditions and procedures as the Committee
may establish. Any permitted transfer shall be subject to the condition that
the Committee receive evidence satisfactory to it that the transfer is being
made for estate and/or tax planning purposes or a gratuitous or donative basis
and without consideration (other than nominal consideration). Notwithstanding
the foregoing, Incentive Stock Options shall be subject to any and all
additional transfer restrictions under the Code.
(c) FURTHER EXCEPTIONS TO LIMITS ON TRANSFER. The exercise and
transfer restrictions in Section 1.8(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive benefits in the
event of the Participant's death or, if the Participant has died,
transfers to or exercise by the Participant's beneficiary, or, in the
absence of a validly designated beneficiary, transfers by will or the
laws of descent and distribution,
(iii) if the Participant has suffered a disability, permitted
transfers or exercises on behalf of the Participant by his or her legal
representative, or
(iv) the authorization by the Committee of "cashless exercise"
procedures with third parties who
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provide financing for the purpose of (or who otherwise facilitate) the
exercise of Awards consistent with applicable laws and the express
authorization of the Committee.
Notwithstanding the foregoing, Incentive Stock Options shall be subject to all
applicable transfer restrictions under the Code.
2. OPTIONS.
2.1 GRANTS.
One or more Options may be granted under this Article to any
Eligible Person. Each Option granted shall be designated in the applicable
Award Agreement, by the Committee as either an Incentive Stock Option, subject
to Section 2.3, or a Non-Qualified Stock Option.
2.2 OPTION PRICE.
(a) PRICING LIMITS. The purchase price per share of the Common
Stock covered by each Option shall be determined by the Committee at the time of
the Award, but in the case of Incentive Stock Options shall not be less than
100% (110% in the case of a Participant described in Section 2.4) of the Fair
Market Value of the Common Stock on the date of grant and in all cases shall not
be less than the par value thereof.
(b) PAYMENT PROVISIONS. The purchase price of any shares
purchased on exercise of an Option granted under this Article shall be paid in
full at the time of each purchase in one or a combination of the following
methods: (i) in cash or by electronic funds transfer; (ii) by check payable to
the order of the Corporation; (iii) by notice and third party payment in such
manner as may be authorized by the Committee; or (iv) by the delivery of shares
of Common Stock of the Corporation already owned by the Participant, PROVIDED,
HOWEVER, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Award by delivering such shares, and
provided further that any shares delivered which were initially acquired upon
exercise of a stock option must have been owned by the Participant at least six
months as of the date of delivery. Shares of Common Stock used to satisfy the
exercise price of an Option shall be valued at their Fair Market Value on the
date of exercise.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 LIMIT. To the extent that the aggregate "Fair
Market Value" of stock with respect to which incentive stock options first
become exercisable by a
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Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of the Company or any
parent corporation, such options shall be treated as Nonqualified Stock Options.
For this purpose, the Fair Market Value of the stock subject to options shall be
determined as of the date the options were awarded. In reducing the number of
options treated as incentive stock options to meet the $100,000 limit, the most
recently granted options shall be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
(b) OPTION PERIOD. Each Option and all rights thereunder shall
expire no later than 10 years after the Award Date.
(c) OTHER CODE LIMITS. Incentive Stock Options may only be
granted to Eligible Employees who are actually employed by the Corporation or a
Subsidiary and that satisfy the other eligibility requirements of the Code.
There shall be imposed in any Award Agreement relating to Incentive Stock
Options such other terms and conditions as from time to time are required in
order that the Option be an "incentive stock option" as that term is defined in
Section 422 of the Code.
2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who, at the
time the Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option is at least 110% of the Fair Market Value of
the stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.5 OPTION REPRICING/CANCELLATION AND REGRANT/WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 5.6 and the specific
limitations on Awards contained in this Plan, the Committee from time to time
may authorize, generally or in specific cases only, for the benefit of any
Eligible Person any adjustment in the exercise or purchase price, the vesting
schedule, the number of shares subject to, the restrictions upon or the term of,
an Award granted under this Article by cancellation of an outstanding Award and
a
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subsequent regranting of an Award, by amendment, by substitution of an
outstanding Award, by waiver or by other legally valid means. Such amendment or
other action may result, among other changes, in an exercise or purchase price
which is higher or lower than the exercise or purchase price of the original
Award or prior Award, provide for a greater or lesser number of shares subject
to the Award, or provide for a longer or shorter vesting or exercise period.
2.6 OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY
OTHER CORPORATIONS. Options and Stock Appreciation Rights may be granted to
Eligible Persons under this Plan in substitution for employee stock options
granted by other entities to persons who are or who will become Eligible Persons
in respect of the Company, in connection with a distribution, merger or
reorganization by or with the granting entity or an affiliated entity, or the
acquisition by the Company, directly or indirectly, of all or a substantial part
of the stock or assets of the other entity.
3. STOCK APPRECIATION RIGHTS.
3.1 GRANTS.
In its discretion, the Committee may grant a Stock Appreciation
Right to any Eligible Person either concurrently with the grant of another Award
or in respect of an outstanding Award, in whole or in part, or independently of
any other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder, unless the holder otherwise agrees.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
(a) EXERCISABILITY. Unless the Award Agreement or the
Committee otherwise provides, a Stock Appreciation Right related to another
Award shall be exercisable at such time or times, and to the extent, that the
related Award shall be exercisable.
(b) EFFECT ON AVAILABLE SHARES. To the extent that a Stock
Appreciation Right is exercised, the number of underlying shares of Common Stock
theretofore subject to a related Award shall be charged against the maximum
amount of Common Stock that may be delivered pursuant to Awards under this Plan.
The number of shares subject to the Stock Appreciation Right and the related
Option of the Participant shall, however, be reduced by the number of underlying
shares as to which the exercise related, unless the Award
Agreement otherwise provides.
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(c) STAND-ALONE SARS. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement but in no event earlier than six months after the Award
Date, except in the case of death or Total Disability.
3.3 PAYMENT.
(a) AMOUNT. Unless the Committee otherwise provides, upon
exercise of a Stock Appreciation Right and the attendant surrender of an
exercisable portion of any related Award, the Participant shall be entitled to
receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the exercise price
per share of Common Stock under the related Award (if applicable) or the
initial share value specified in the Award from the Fair Market Value of
a share of Common Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) the number of shares with respect to which the Stock
Appreciation Right shall have been exercised.
(b) FORM OF PAYMENT. The Committee, in its sole discretion,
shall determine the form in which payment shall be made of the amount determined
under paragraph (a) above, either solely in cash, solely in shares of Common
Stock (valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right), or partly in such shares and partly in cash, provided that
the Committee shall have determined that such exercise and payment are
consistent with applicable law. If the Committee permits the Participant to
elect to receive cash or shares (or a combination thereof) on such exercise, any
such election shall be subject to such conditions as the Committee may impose.
4. PERFORMANCE SHARE AWARDS AND STOCK BONUSES
4.1 GRANTS OF PERFORMANCE SHARE AWARDS.
The Committee may, in its discretion, grant Performance Share
Awards to Eligible Persons based upon such factors as the Committee shall deem
relevant in light of the specific type and terms of the award. An Award
Agreement shall specify the maximum number of shares of Common Stock (if any)
subject to the Performance Share Award, the consideration (but not less than the
minimum lawful consideration) to be paid for any such shares as may be issuable
to the Participant, the duration of the Award and the conditions upon which
delivery of any shares or cash to the Participant shall be based. The amount of
cash or shares or other property that may be deliverable pursuant to such Award
shall be based upon the degree of attainment over
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a specified period of not more than 10 years (a "performance cycle") as may be
established by the Committee of such measure(s) of the performance of the
Company (or any part thereof) or the Participant as may be established by the
Committee. The Committee may provide for full or partial credit, prior to
completion of such performance cycle or the attainment of the performance
achievement specified in the Award, in the event of the Participant's death,
Retirement, or Total Disability, a Change in Control Event or in such other
circumstances as the Committee consistent with Section 5.10(c)(2), if applicable
may determine.
4.2 SPECIAL PERFORMANCE-BASED SHARE AWARDS.
Without limiting the generality of the foregoing, and in addition
to Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right,"
respectively), other performance-based awards within the meaning of
Section 162(m) of the Code ("PERFORMANCE-BASED AWARDS"), whether in the form of
performance stock, phantom stock, Cash-Based Awards, or other rights, the grant,
vesting, exercisability or payment of which depends on the degree of achievement
of the Performance Goals relative to preestablished targeted levels for the
Corporation or the Corporation and one or more of its Subsidiaries, may be
granted under this Plan. Any Qualifying Option or Qualifying Stock Appreciation
Right shall be subject only to the requirements of subsections (a) and (c) below
in order for such Awards to satisfy the requirements for Performance-Based
Awards under this Section 4.2. With the exception of any Qualifying Option or
Qualifying Stock Appreciation Right, an Award that is intended to satisfy the
requirements of this Section 4.2 shall be designated as a Performance-Based
Award at the time of grant.
(a) ELIGIBLE CLASS. The eligible class of persons for
Performance-Based Awards under this Section shall be the executive officers of
the Corporation.
(b) PERFORMANCE GOAL ALTERNATIVES. The specific performance
goals for Performance-Based Awards granted under this Section (other than
Qualifying Options and Qualifying Stock Appreciation Rights) shall be, on an
absolute or relative basis, one or more of the Performance Goals, as selected by
the Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
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(and any regulations issued thereunder) so that such targets are considered to
be preestablished and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.
(c) MAXIMUM PERFORMANCE-BASED AWARD. Notwithstanding any other
provision of the Plan to the contrary, the maximum number of shares of Common
Stock which may be delivered pursuant to options, stock appreciation rights or
other share-based awards that are granted as Performance-Based Awards to any
Participant in any calendar year shall not exceed 75,000 shares, either
individually or in the aggregate, subject to adjustment as provided in Section
5.2. Awards that are cancelled during the year shall be counted against this
limit to the extent required by Section 162(m) of the Code. In addition, the
aggregate amount of compensation to be paid to any Participant in respect of any
Cash-Based Awards that are granted during any calendar year as Performance-Based
Awards shall not exceed $200,000.
(d) COMMITTEE CERTIFICATION. Before any Performance-Based
Award under this Section 4.2 (other than Qualifying Options or Qualifying Stock
Appreciation Rights) is paid, the Committee must certify in writing that the
Performance Goal(s) and any other material terms of the Performance-Based Award
were satisfied; provided, however, that a Performance-Based Award may be paid
without regard to the satisfaction of the applicable Performance Goal in the
event of a Change in Control Event in accordance with Section 5.2(d).
(e) TERMS AND CONDITIONS OF AWARDS. The Committee will have
the discretion to determine the restrictions or other limitations of the
individual Awards granted under this Section 4.2 including the authority to
reduce Awards, payouts or vesting or to pay no Awards, in its sole discretion,
if the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise.
(f) ADJUSTMENTS FOR CHANGES IN CAPITALIZATION AND OTHER
MATERIAL CHANGES. In the event of a change in corporate capitalization, such
as a stock split or stock dividend, or a corporate transaction, such as a
merger, consolidation, spinoff, reorganization or similar event, or any partial
or complete liquidation of the Corporation, or any similar event consistent with
regulations issued under Section 162(m) of the Code including, without
limitation, any material change in accounting policies or practices affecting
the Corporation and/or the Performance Goals or targets, then the Committee may
make adjustments to the Performance Goals and targets relating to outstanding
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Performance-Based Awards to the extent such adjustments are made to reflect the
occurrence of such an event; provided, however, that adjustments described in
this subsection may be made only to the extent that the occurrence of an event
described herein was unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.
4.3 GRANTS OF STOCK BONUSES.
The Committee may grant a Stock Bonus to any Eligible Person to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of shares
so awarded shall be determined by the Committee. The Award may be granted
independently or in lieu of a cash bonus.
4.4 DEFERRED PAYMENTS.
The Committee may authorize for the benefit of any Eligible Person
the deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
5. OTHER PROVISIONS.
5.1 RIGHTS OF ELIGIBLE PERSONS, PARTICIPANTS AND BENEFICIARIES.
(a) EMPLOYMENT STATUS. Status as an Eligible Person shall not
be construed as a commitment that any Award will be made under this Plan to an
Eligible Person or to Eligible Persons generally.
(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or
in any other documents related to this Plan or to any Award) shall confer upon
any Eligible Person or other Participant any right to continue in the employ or
other service of the Company or constitute any contract or agreement of
employment or other service, nor shall interfere in any way with the right of
the Company to change such person's compensation or other benefits or to
terminate the employment of such person, with or without cause, but nothing
contained in this Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her consent thereto.
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(c) PLAN NOT FUNDED. Awards payable under this Plan shall be
payable in shares or from the general assets of the Corporation, and no special
or separate reserve, fund or deposit shall be made to assure payment of such
Awards. No Participant, Beneficiary or other person shall have any right, title
or interest in any fund or in any specific asset (including shares of Common
Stock, except as expressly otherwise provided) of the Company by reason of any
Award hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan shall create, or be construed to create,
a trust of any kind or a fiduciary relationship between the Company and any
Participant, Beneficiary or other person. To the extent that a Participant,
Beneficiary or other person acquires a right to receive payment pursuant to any
Award hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
5.2 ADJUSTMENTS; ACCELERATION.
(a) ADJUSTMENTS. If there shall occur any extraordinary dividend
or other extraordinary distribution in respect of the Common Stock (whether in
the form of cash, Common Stock, other securities, or other property), or any
reclassification, recapitalization, stock split (including a stock split in the
form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock or other securities of the Corporation, or there shall
occur any other like corporate transaction or event in respect of the Common
Stock or a sale of substantially all the assets of the Corporation as an
entirety, then the Committee shall, in such manner and to such extent (if any)
as it deems appropriate and equitable (1) proportionately adjust any or all of
(a) the number and type of shares of Common Stock (or other securities) which
thereafter may be made the subject of Awards (including the specific maxima and
numbers of shares set forth elsewhere in this Plan), (b) the number, amount and
type of shares of Common Stock (or other securities or property) subject to any
or all outstanding Awards, (c) the grant, purchase, or exercise price of any or
all outstanding Awards, (d) the securities, cash or other property deliverable
upon exercise of any outstanding Awards, or (e) the performance standards
appropriate to any outstanding Awards, or (2) in the case of an extraordinary
dividend or other distribution, recapitalization, reclassification, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a cash payment or for the substitution or
exchange of any or all outstanding Awards or the cash, securities or property
deliverable to the holder of any or all outstanding Awards based upon the
distribution or consideration payable to holders of the Common Stock of the
Corporation upon or in respect of such
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event; PROVIDED, HOWEVER, in each case, that with respect to Awards of Incentive
Stock Options, no such adjustment shall be made which would cause the Plan to
violate Section 424(a) of the Code or any successor provisions thereto without
the written consent of holders materially adversely affected thereby. In any of
such events, the Committee may take such action sufficiently prior to such event
if necessary to permit the Participant to realize the benefits intended to be
conveyed with respect to the underlying shares in the same manner as is
available to shareholders generally.
(b) ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. As to any
Participant, unless prior to a Change in Control Event, the Committee determines
that, upon its occurrence, there shall be no acceleration of benefits under
Awards or determines that only certain or limited benefits under Awards shall be
accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Change in Control Event for such
acceleration, then upon the occurrence of a Change in Control Event (i) each
Option and Stock Appreciation Right shall become immediately exercisable, (ii)
each Performance Share Award shall become payable to the Participant. The
Committee may override the limitations on acceleration in this Section 5.2(b) by
express provision in the Award Agreement and may accord any Eligible Person a
right to refuse any acceleration, whether pursuant to the Award Agreement or
otherwise, in such circumstances as the Committee may approve. Any acceleration
of Awards shall comply with applicable regulatory requirements, including
without limitation Section 422 of the Code.
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any
Option or other right to acquire Common Stock under this Plan (other than under
Article 7) has been fully accelerated as permitted by Section 5.2(b) but is not
exercised prior to (i) a dissolution of the Corporation, or (ii) an event
described in Section 5.2(a) that the Corporation does not survive, or (iii) the
consummation of an event described in Section 5.2(a) that results in a Change in
Control Event approved by the Board, such Option or right shall thereupon
terminate, subject to any provision that has been expressly made by the
Committee for the survival, substitution, exchange or other settlement of such
Option or right.
5.3 EFFECT OF TERMINATION OF EMPLOYMENT.
The Committee shall establish in respect of each Award granted to
an Eligible Person the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination. In addition, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other than discharge
for cause, the
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Committee may, in its discretion, increase the portion of the Participant's
Award available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of Section
1.6, extend the exercisability period upon such terms as the Committee shall
determine and expressly set forth in or by amendment to the Award Agreement.
5.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this Plan and
the offer, issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including but not limited to state and federal securities law and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
5.5 TAX WITHHOLDING.
Upon any exercise, vesting, or payment of any Award or upon the
disposition of shares of Common Stock acquired pursuant to the exercise of an
Incentive Stock Option prior to satisfaction of the holding period requirements
of Section 422 of the Code, the Company shall have the right at its option to
(i) require the Participant (or Personal Representative or Beneficiary, as the
case may be) to pay or provide for payment of the amount of any taxes which the
Company may be required to withhold with respect to such Award event or payment
or (ii) deduct from any amount payable in cash the amount of any taxes which the
Company may be required to withhold with respect to such cash payment. In any
case where a tax is required to be withheld in connection with the delivery of
shares of Common Stock under this Plan, the Committee may in its sole discretion
grant (either at the time of the Award or thereafter) to the Participant the
right to elect, pursuant to such rules and subject to such conditions as the
Committee may establish, to have the Corporation reduce the number of shares to
be delivered by (or otherwise reacquire) the appropriate number of shares valued
at their then Fair Market Value, to satisfy such withholding obligation.
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5.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
(a) BOARD AUTHORIZATION. The Board may, at any time, terminate
or, from time to time, amend, modify or suspend this Plan, in whole or in part.
No Awards may be granted during any suspension of this Plan or after termination
of this Plan, but the Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) STOCKHOLDER APPROVAL. Any amendment that would (i)
materially increase the benefits accruing to Participants under this Plan, (ii)
materially increase the aggregate number of securities that may be issued under
this Plan, or (iii) materially modify the requirements as to eligibility for
participation in this Plan, shall be subject to stockholder approval only to the
extent then required by Section 422 of the Code or applicable law, or deemed
necessary or advisable by the Board.
(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards to Eligible Persons that the Committee in the prior exercise of its
discretion has imposed, without the consent of a Participant, and may make other
changes to the terms and conditions of Awards that do not affect in any manner
materially adverse to the Participant, his or her rights and benefits under an
Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No
amendment, suspension or termination of this Plan or change of or affecting any
outstanding Award shall, without written consent of the Participant, affect in
any manner materially adverse to the Participant any rights or benefits of the
Participant or obligations of the Corporation under any Award granted under this
Plan prior to the effective date of such change. Changes contemplated by
Section 5.2 shall not be deemed to constitute changes or amendments for purposes
of this Section 5.6.
5.7 PRIVILEGES OF STOCK OWNERSHIP.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any shares of Common Stock not actually delivered to and held of record by
him or her. No adjustment will be made for dividends or other rights as a
shareholders for which a record date is prior to such date of delivery.
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5.8 EFFECTIVE DATE OF THE PLAN.
This Plan shall be effective as of March __, 1997, the date of
Board approval, subject to shareholder approval within 12 months thereafter.
5.9 TERM OF THE PLAN.
No Award shall be granted more than ten (10) years after the
effective date of this Plan (the "termination date"). Unless otherwise
expressly provided in this Plan or in an applicable Award Agreement, any Award
granted prior to the termination date may extend beyond such date, and all
authority of the Committee with respect to Awards hereunder, including the
authority to amend an Award, shall continue during any suspension of this Plan
and in respect of Awards outstanding on the termination date.
5.10 GOVERNING LAW/CONSTRUCTION/SEVERABILITY.
(a) CHOICE OF LAW. This Plan, the Awards, all documents
evidencing Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the state of incorporation of the
Corporation.
(b) SEVERABILITY. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) PLAN CONSTRUCTION.
(1) RULE 16b-3. It is the intent of the Corporation that
transactions in and affecting Awards in the case of Participants who are
or may be subject to Section 16 of the Exchange Act satisfy any then
applicable requirements of Rule 16b-3 so that such persons (unless they
otherwise agree) will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the Exchange Act in respect of those
transactions and will not be subjected to avoidable liability thereunder.
If any provision of this Plan or of any Award would otherwise frustrate
or conflict with the intent expressed above, that provision to the extent
possible shall be interpreted as to avoid such conflict. If the conflict
remains irreconcilable, the Committee may disregard the provision if it
concludes that to do so furthers the interest of the Corporation and is
consistent with the purposes of this Plan as to such persons in the
circumstances.
(2) SECTION 162(m). It is the further intent of the Company
that Options or Stock Appreciation Rights with an exercise or base price
not less than Fair
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Market Value on the date of grant and performance awards under Section
4.2 of this Plan that are granted to or held by a Section 16 Person shall
qualify as performance-based compensation under Section 162(m) of the
Code, and this Plan shall be interpreted consistent with such intent.
5.11 CAPTIONS.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of this Plan or any provision thereof.
5.12 EFFECT OF CHANGE OF SUBSIDIARY STATUS.
For purposes of this Plan and any Award hereunder, if an entity
ceases to be a Subsidiary a termination of employment and service shall be
deemed to have occurred with respect to each Eligible Person in respect of such
Subsidiary who does not continue as an Eligible Person in respect of another
entity within the Company.
5.13 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under any other
plan or authority.
6. DEFINITIONS.
6.1 DEFINITIONS.
(a) "AWARD" shall mean an award of any Option, Stock
Appreciation Right, Stock Bonus, Performance-Based Award, Cash-Based Award,
Performance Share Award, dividend equivalent or deferred payment right or other
right or security that would constitute a "derivative security" under Rule 16a-
1(c) of the Exchange Act, or any combination thereof, whether alternative or
cumulative, authorized by and granted under this Plan.
(b) "AWARD AGREEMENT" shall mean any writing setting forth the
terms of an Award that has been authorized by the Committee.
(c) "AWARD DATE" shall mean the date upon which the Committee
took the action granting an Award or such later date as the Committee designates
as the Award Date at the time of the Award or, in the case of Awards under
Article 7, the applicable dates set forth therein.
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(d) "AWARD PERIOD" shall mean the period beginning on an Award
Date and ending on the expiration date of such Award.
(e) "BENEFICIARY" shall mean the person, persons, trust or
trusts designated by a Participant or, in the absence of a designation, entitled
by will or the laws of descent and distribution, to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is designated and able to act under the circumstances.
(f) "BOARD" shall mean the Board of Directors of the
Corporation.
(g) "CASH-BASED AWARDS" shall mean Awards that, if paid, must
be paid in cash and that are neither denominated in nor have a value derived
from the value of, nor an exercise or conversion privilege at a price related
to, shares of Common Stock.
(h) "CASH FLOW" shall mean cash and cash equivalents derived
from either (i) net cash flow from operations or (ii) net cash flow from
operations, financings and investing activities, as determined by the Committee
at the time an Award is granted.
(i) "CHANGE IN CONTROL EVENT" shall mean any of the following:
(1) Approval by the shareholders of the Corporation of the
dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with or into
one or more entities that are not Subsidiaries or other affiliates, as a
result of which less than 40% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are,
or will be, owned, directly or indirectly, by shareholders of the
Corporation immediately before such reorganization (assuming for purposes
of such determination that there is no change in the record ownership of
the Corporation's securities from the record date for such approval until
such reorganization and that such record owners hold no securities of the
other parties to such reorganization), but including in such
determination any securities of the other parties to such reorganization
held by affiliates of the Corporation);
(3) Approval by the shareholders of the Corporation of the sale
of substantially all of the
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Corporation's business and/or assets to a person or entity which is not a
Subsidiary or other affiliate; or;
(4) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act but excluding any person described in and
satisfying the conditions of Rule 13d-1(b)(1) thereunder), other than a
person who is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of more than 30% of the outstanding Shares of Common Stock
at the time of adoption of this Plan, (or an affiliate, successor, heir,
descendant or related party of or to any such person, becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
more than 30% of the combined voting power of the Corporation's then
outstanding securities entitled to then vote generally in the election of
directors of the Corporation; or
(5) During any period not longer than two consecutive years,
individuals who at the beginning of such period constituted the Board
cease to constitute at least a majority thereof, unless the election, or
the nomination for election by the Corporation's shareholders, of each
new Board member was approved by a vote of at least [three-fourths] of
the Board members then still in office who were Board members at the
beginning of such period (including for these purposes, new members whose
election or nomination was so approved).
(j) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(k) "COMMISSION" shall mean the Securities and Exchange
Commission.
(l) "COMMITTEE" shall mean the Board or a committee appointed
by the Board to administer this Plan, which committee shall be comprised only of
two or more directors or such greater number of directors as may be required
under applicable law, each of whom, in respect of any decision at a time when
the Participant affected by the decision may be subject to Section 162(m) of the
Code, shall be an "outside" director within the meaning of Section 162(m) of the
Code.
(m) "COMMON STOCK" shall mean the Common Stock of the
Corporation and such other securities or property as may become the subject of
Awards, or become subject to Awards, pursuant to an adjustment made under
Section 5.2 of this Plan.
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(n) "COMPANY" shall mean, collectively, the Corporation and its
Subsidiaries.
(o) "CORPORATION" shall mean Kaynar Holdings Inc., a Delaware
corporation, and its successors.
(p) "DISINTERESTED" shall mean disinterested within the meaning
of any applicable regulatory requirements, including Rule 16b-3.
(q) "ELIGIBLE EMPLOYEE" shall mean an officer (whether or not a
director) or key employee of the Company.
(r) "ELIGIBLE PERSON" means an Eligible Employee, or any Other
Eligible Person, as determined by the Committee in its discretion, or, with
respect to the provisions of Article 7, a Non-Employee Director.
(s) "EPS" shall mean earnings per common share on a fully
diluted basis determined by dividing (i) net earnings, less dividends on
preferred stock of the Corporation by (ii) the weighted average number of common
shares and common shares equivalents outstanding.
(t) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
(u) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(v) "FAIR MARKET VALUE" on any date shall mean (i) if the stock
is listed or admitted to trade on a national securities exchange, the closing
price of the stock on the Composite Tape, as published in the Western Edition of
The Wall Street Journal, of the principal national securities exchange on which
the stock is so listed or admitted to trade, on such date, or, if there is no
trading of the stock on such date, then the closing price of the stock as quoted
on such Composite Tape on the next preceding date on which there was trading in
such shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information; (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization; or (iv) if the
stock is not listed or admitted to trade on a national securities exchange, is
not reported on the National Market Reporting System and if bid and asked prices
for the stock are not furnished by the NASD
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or a similar organization, the value as established by the Committee at such
time for purposes of this Plan.
(w) "INCENTIVE STOCK OPTION" shall mean an Option which is
intended, as evidenced by its designation, as an incentive stock option within
the meaning of Section 422 of the Code, the award of which contains such
provisions (including but not limited to the receipt of shareholder approval of
this Plan, if the Award is made prior to such approval) and is made under such
circumstances and to such persons as may be necessary to comply with that
section.
(x) "NONQUALIFIED STOCK OPTION" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
(y) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board of
Directors of the Corporation who is not an officer or employee of the Company.
(z) "NON-EMPLOYEE DIRECTOR PARTICIPANT" shall mean a Non-
Employee Director who holds an outstanding Award under the provisions of Article
7.
(aa) "OPTION" shall mean an option to purchase Common Stock
granted under this Plan. The Committee shall designate any Option granted to an
Eligible Person as a Nonqualified Stock Option or an Incentive Stock Option.
Options granted under Article 7 shall be Nonqualified Stock Options.
(ab) "OTHER ELIGIBLE PERSON" shall mean any individual
consultant or advisor who or (to the extent provided in the next sentence) agent
who renders or has rendered BONA FIDE services (other than services in
connection with the offering or sale of securities of the Company in a capital
raising transaction) to the Company, and who is selected to participate in this
Plan by the Committee; PROVIDED that if the Corporation's officers and directors
are or become subject to Section 16 of the Exchange Act, a Non-Employee Director
shall not thereafter be selected as an Other Eligible Person. A non-employee
agent providing BONA FIDE services to the Company (other than as an eligible
advisor or consultant) may also be selected as an Other Eligible Person if such
agent's participation in this Plan would not adversely affect (x) the
Corporation's eligibility to use Form S-8 to register under the Securities Act
of 1933, as amended, the offering of shares issuable under this Plan by the
Corporation or (y) the Corporation's compliance with any other applicable laws.
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(ac) "PARTICIPANT" shall mean an Eligible Person who has been
granted an Award under this Plan and a Non-Employee Director who has been
received an Award under Article 7 of this Plan.
(ad) "PERFORMANCE-BASED AWARD" shall mean an Award of a right to
receive shares of Common Stock or other compensation (including cash) under
Section 4.2, the issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives specified by the Committee.
(ae) "PERFORMANCE GOALS" shall mean EPS or ROE or Cash Flow or
Total Stockholder Return, and "Performance Goals" means any combination thereof.
(af) "PERFORMANCE SHARE AWARD" shall mean an Award of a right to
receive shares of Common Stock under Section .1, the issuance or payment of
which is contingent upon, among other conditions, the attainment of performance
objectives specified by the Committee.
(ag) "PERSONAL REPRESENTATIVE" shall mean the person or persons
who, upon the disability or incompetence of a Participant, shall have acquired
on behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(ah) "PLAN" shall mean this Kaynar Holdings Inc. 1997 Stock
Incentive Plan.
(ai) "ROE" shall mean consolidated net income of the Corporation
(less preferred dividends), divided by the average consolidated common
shareholders equity.
(aj) "RULE 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act, as amended from time to time.
(ak) "SECTION 16 PERSON" shall mean a person subject to Section
16(a) of the Exchange Act.
(al) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
(am) "STOCK APPRECIATION RIGHT" shall mean a right authorized
under this Plan to receive a number of shares of Common Stock or an amount of
cash, or a combination of shares and cash, the aggregate amount or value of
which is determined by reference to a change in the Fair Market Value of the
Common Stock.
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(an) "STOCK BONUS" shall mean an Award of shares of Common Stock
granted under this Plan for no consideration other than past services and
without restriction other than such transfer or other restrictions as the
Committee may deem advisable to assure compliance with law.
(ao) "SUBSIDIARY" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
(ap) "TOTAL DISABILITY" shall mean a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code and (except in
the care of a Non-Employee Director) such other disabilities, infirmities,
afflictions or conditions as the Committee by rule may include.
7. NON-EMPLOYEE DIRECTOR OPTIONS.
7.1 PARTICIPATION.
Awards under this Article 7 shall be made only to Non-Employee
Directors and shall be evidenced by Award Agreements substantially in the form
of Exhibit A hereto.
7.2 ANNUAL OPTION GRANTS.
(a) TIME OF INITIAL AWARD. Persons who are Non-Employee
Directors in office at the time this Plan is first approved by the shareholders
of the Corporation shall be granted without further action a Nonqualified Stock
Option to purchase 1,000 shares of Common Stock. After approval of this Plan by
the shareholders of the Corporation, if any person who is not then an officer or
employee of the Company shall become a director of the Corporation, there shall
be granted automatically to such person (without any action by the Board or
Committee) a Nonqualified Stock Option (the Award Date of which shall be the
date such person takes office) to purchase 1,000 shares of Common Stock.
(b) SUBSEQUENT ANNUAL AWARDS. On January 31 in each year
during the term of the Plan, commencing in 1998, there shall be granted
automatically (without any action by the Committee or the Board) a Nonqualified
Stock Option (the Award Date of which shall be such date in January) to each
Non-Employee Director then continuing in office to purchase 500 shares of Common
Stock.
(c) MAXIMUM NUMBER OF SHARES. Annual grants that would
otherwise exceed the maximum number of shares under Section 1.4(a) shall be
prorated within such limitation. A Non-Employee Director shall not receive more
than one Nonqualified Stock Option under this Section 7.2 in any calendar year.
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<PAGE>
7.3 OPTION PRICE.
The purchase price per share of the Common Stock covered by each
Option granted pursuant to Section 7.2 hereof shall be 100 percent of the Fair
Market Value of the Common Stock on the Award Date. The exercise price of any
Option granted under this Article shall be paid in full at the time of each
purchase in cash or by check or in shares of Common Stock valued at their Fair
Market Value on the date of exercise of the Option, or partly in such shares and
partly in cash, PROVIDED THAT any such shares used in payment shall have been
owned by the Participant at least six months prior to the date of exercise.
7.4 OPTION PERIOD AND EXERCISABILITY.
Each Option granted under this Article 7 and all rights or
obligations thereunder shall expire five (5) years after the Award Date and
shall be subject to earlier termination as provided below. Each Option granted
under Section 7.2 shall become exercisable at the rate of 25% per annum
commencing on the first anniversary of the Award Date and each of the next three
anniversaries thereof.
7.5 TERMINATION OF DIRECTORSHIP.
If a Non-Employee Director's services as a member of the Board of
Directors terminate by reason of death, or Total Disability, an Option granted
pursuant to this Article held by such Participant shall immediately become and
shall remain exercisable for two years after the date of such termination or
until the expiration of the stated term of such Option, whichever first occurs.
If a Non-Employee Director's services as a member of the Board of Directors
terminate for any other reason, any portion of an Option granted pursuant to
this Article which is not then exercisable shall terminate and any portion of
such Option which is then exercisable may be exercised for six months after the
date of such termination or until the expiration of the stated term whichever
first occurs.
7.6 ACCELERATION AND ADJUSTMENTS.
Options granted under this Article 7 shall be subject to
acceleration and adjustment as provided in Section 6.2, but only to the extent
that such acceleration and adjustment is consistent with changes to Options held
by persons other than executive officers or directors of the Corporation.
7.7 ACCELERATION UPON A CHANGE IN CONTROL EVENT.
Upon the occurrence of a Change in Control Event, each Option
granted under Section 7.2 hereof shall become immediately exercisable in full;
provided, however, that
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<PAGE>
none of the Options granted under Section 7.2 shall be accelerated to a date
less than six months after the Award Date of such Option. To the extent that
any Option granted under this Article 7 is not exercised prior to (i) a
dissolution of the Corporation or (ii) a merger or other corporate event that
the Corporation does not survive, and no provision is (or consistent with the
provisions of Section 7.7 can be) made for the assumption, conversion,
substitution or exchange of the Option, the Option shall terminate upon the
occurrence of such event.
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<PAGE>
EXHIBIT A
KAYNAR HOLDINGS INC.
ELIGIBLE DIRECTOR
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the ____ day of _____________, 199__,
between KAYNAR HOLDINGS INC., a Delaware corporation (the "Corporation"), and
________________ (the "Director").
W I T N E S S E T H
WHEREAS, the Corporation has adopted and the shareholders of the
Corporation have approved the 1997 Stock Incentive Plan (the "Plan").
WHEREAS, pursuant to Article 7.2 of the Plan, the Corporation has
granted an option (the "Option") to the Director upon the terms and conditions
evidenced hereby, as required by the Plan, which Option is not intended as and
shall not be deemed to be an incentive stock option within the meaning of
Section 422 of the Code.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Director, the Corporation and the Director agree to the terms
and conditions set forth herein as required by the terms of the Plan.
1. OPTION GRANT. This Agreement evidences the grant to the
Director, as of ___________, 199__ (the "Option Date"), of an Option to purchase
an aggregate of [INSERT NUMBER] shares of Common Stock, par value $.01 per
share, under Section 7.2 of the Plan, subject to the terms and conditions and to
adjustment as set forth herein or in pursuant to the Plan.
2. EXERCISE PRICE. The Option entitles the Director to purchase
(subject to the terms of Sections 3 through 5 below) all or any part of the
Option shares at a price per share of $____.___, which amount represents the
Fair Market Value of the shares on the Option Date.
3. OPTION EXERCISABILITY AND TERM. Subject to acceleration and
adjustment pursuant to Section 7.6 of the Plan, the Option shall first become
and remain exercisable as to 25% of the shares on ____________, _____ and as to
an additional 25% of the shares on each of the following dates: ______________,
_____, __________, _____ and _____________,
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<PAGE>
_____. The Option shall terminate on ____________, 19__,* unless earlier
terminated in accordance with the terms of Section 5.6 of the Plan.
4. SERVICE AND EFFECT OF TERMINATION OF SERVICE. The Director
agrees to serve as a director in accordance with the provisions of the
Corporation's Certificate of Incorporation, bylaws and applicable law. If the
Director's services as a member of the Board shall terminate, this Option shall
terminate at the times and to the extent set forth in Section 7.5 of the Plan.
5. GENERAL TERMS. The Option and this Agreement are subject to, and
the Corporation and the Director agree to be bound by, the provisions of the
Plan that apply to the Option. Such provisions are incorporated herein by this
reference. The Director acknowledges receiving a copy of the Plan and reading
its applicable provisions. Capitalized terms not otherwise defined herein shall
have the meaning assigned to such terms in the Plan.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
KAYNAR HOLDINGS INC.
(a Delaware corporation)
By ___________________________
Title _____________________
Optionee Director
_____________________________
(Signature)
_____________________________
(Print Name)
_____________________________
(Address)
_____________________________
(City, State, Zip Code)
__________________
*insert day before fifth anniversary of date of grant.
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In consideration of the execution of the foregoing Stock Option
Agreement by KAYNAR HOLDINGS INC., I, ____________________________, the spouse
of the Director therein named, do hereby agree to be bound by all of the terms
and provisions thereof and of the Plan.
DATED: ______________, 19__.
___________________________
Signature of Spouse
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<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and between
KAYNAR TECHNOLOGIES INC., a Delaware corporation, (the "Company") and
("Employee"), as of the day of February 1997.
I. EMPLOYMENT.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
II. TERMS.
This Agreement shall be effective from the date hereof to December 31,
1998; provided, however, that on June 30, 1997, eighteen months before
expiration and every six months thereafter ("Renewal Date"), this Agreement
shall be extended for two additional years unless, at least 30 days prior to the
Renewal Date (which shall be either June 30 or December 31), the Company shall
have delivered to Employee or Employee shall have delivered to the Company
written notice that the Agreement shall not be so extended.
III. DUTIES.
A. Employee shall serve during the course of his employment as
of the Company, and shall have such other duties and
responsibilities as the Board of Directors of the Company shall determine from
time to time.
B. Employee agrees to devote substantially all of his time, energy and
ability to the business of the Company. Nothing herein shall prevent Employee,
upon approval of the Board of Directors of the Company, from serving as a
director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any present
or future affiliate of the Company.
IV. COMPENSATION.
A. The Company will pay to Employee a base salary at the rate of
$ per year. Such salary shall be earned monthly and shall be payable
in periodic installments no less frequently than monthly in accordance with the
Company's customary practices. Amounts payable shall be reduced by standard
withholding and other authorized deductions. The Company will review Employee's
salary at least annually. The Company may in its discretion increase Employee's
salary but it may not reduce it during the term of this Agreement.
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B. ANNUAL BONUS, INCENTIVE, SAVINGS AND RETIREMENT PLANS. Employee
shall be entitled to participate in all annual bonus, incentive, stock
incentive, savings and retirement plans, defined contribution plans,
practices, policies and programs applicable generally to other executives of
the Company.
C. WELFARE BENEFIT PLANS. Employee and/or his family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other executives of the Company.
D. EXPENSES. Employee shall be entitled to receive prompt reimbursement
for all reasonable employment expenses incurred by him in accordance with the
policies, practices and procedures as in effect generally with respect to other
executives of the Company.
E. FRINGE BENEFITS. Employee shall be entitled to fringe benefits in
accordance with the plans, practices, programs and policies as in effect
generally with respect to other executives of the Company.
F. VACATION. Employee shall be entitled to paid vacation time in
accordance with the plans, policies, programs and practices as in effect with
respect to other employees of the Company.
G. PLAN AMENDMENTS. The Company reserves the right to modify, suspend or
discontinue any and all of its employee plans, practices, policies and programs
at any time without recourse by Employee so long as such action is taken
generally with respect to other similarly situated executives and does not
single out Employee.
V. TERMINATION.
A. DEATH OR DISABILITY. Employee's employment shall terminate
automatically upon Employee's death. If the Company determines in good faith
that a Disability of Employee has occurred (as Disability is defined below), it
may give to Employee written notice in accordance with Section XX of its
intention to terminate Employee's employment. In such event, Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by Employee, provided that, within the 30 days after such
receipt, Employee shall not have returned to full-time performance of his
duties. For purposes of this Agreement,
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<PAGE>
"Disability" shall mean the absence of Employee from his duties with the
Company on a full-time basis for a period of two consecutive months as a
result of incapacity due to mental or physical illness which is determined to
be total and permanent by a physician selected by the Company or its insurers
and acceptable to Employee or his legal representative (such agreement as to
acceptability not to be withheld unreasonably). "Incapacity" as used herein
shall be limited only to such Disability which substantially prevents the
Company from availing itself of the services of Employee or substantially
impairs the Employee's ability to perform services to the standard reasonably
expected by the Company for Employee's office.
B. CAUSE, ETC.. Following a Change in Control, as defined in Section VI
below, during the term of this Agreement remaining after such Change in Control,
the parties agree that the Company may terminate Employee's employment only for
Cause, as "Cause" is defined below. Prior to the occurrence of a Change in
Control (and so long as such termination is not made in connection therewith)
the Company may terminate Employee's employment, at any time, with or without
Cause. The Company also may terminate such employment, at any time, for
Employee's breach of the provisions of Sections VIII (Noncompetition), IX
(Antisolicitation) or XII (Confidential Information) or as set forth in
paragraph A above. For purposes of this Agreement, "Cause" shall mean that the
Company, acting in good faith based upon the information then known to the
Company, determines that Employee has: (1) failed to perform in a material
respect his obligations under this Agreement without proper reason, (2) been
convicted of a felony, or (3) committed a material act of fraud, dishonesty or
gross misconduct which is materially injurious to the Company.
C. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
1. DEATH OR DISABILITY. If Employee's employment is terminated by
reason of Employee's Death or Disability, this Agreement shall not be
subject to any further extension pursuant to Section II hereof.
2. CAUSE, ETC. If Employee's employment is terminated by the
Company pursuant to Section V-B, this Agreement shall terminate without
further obligations to Employee other than for (a) payment of the sum of
Employee's annual base salary through the date of termination and any
accrued vacation pay to the extent not theretofore paid, which shall be
paid to Employee or his estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the date of termination; (b) payment of any
compensation previously deferred by Employee (together with any accrued
interest or earnings
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<PAGE>
thereon), which shall be paid to Employee or his estate or beneficiary
pursuant to terms of the plan or agreement under which such compensation
was deferred; and (c) payment to Employee or his estate or beneficiary,
as applicable, any amounts due pursuant to the terms of any applicable
welfare benefit plans. The payments described in clauses (a) and (b)
shall hereinafter be referred to as the "Accrued Obligations." If it is
subsequently determined that the Company did not have the right to
terminate Employee under Section V-B, then the Company's decision to
terminate shall be deemed to have been made under Section V-C-3 and the
amounts payable thereunder shall be the only amounts Employee may
receive for his termination.
3. OTHER. If the Company breaches this Agreement by terminating
Employee's employment other than pursuant to Sections V-A or V-B, the
Company (a) shall immediately pay to Employee a lump sum equal to two times
Employee's base salary for one year at the rate in effect immediately prior
to Employee's termination of employment, less standard withholdings and
other authorized deductions, and (b) shall timely pay to Employee the
Accrued Obligations. Employee shall have no duty to mitigate damages and
none of the payments provided in this Section V-C-3 shall be reduced by any
amounts earned or received by Employee from a third party at any time.
4. EXCLUSIVE REMEDY. Employee agrees that the payments contemplated
by this Agreement shall constitute the exclusive and sole remedy for any
termination of his employment and Employee covenants not to assert or
pursue any other remedies, at law or in equity, with respect to any
termination of employment.
VI. CHANGE IN CONTROL.
A. Notwithstanding anything to the contrary in this Agreement, if a
Change in Control (as defined below) of the Company occurs during the term of
this Agreement, and if within two years following such Change in Control either
the Company terminates Employee's employment, or if employee terminates his
employment for Good Reason (as defined below), the Company shall pay to Employee
by cashier's check immediately upon Employee's termination of employment with
the Company an amount equal to two times the sum of (1) the amount of the
highest annual base salary paid to Employee during the three most recent
calendar years ending prior to the year in which the Change in Control occurs
and (2) the amount of the highest bonus (or bonuses) paid to Employee for any
calendar year ending prior to the year in which the Change in Control occurs.
This payment shall be in lieu of the lump sum payment
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<PAGE>
otherwise payable under Section V-C-3(a), but shall be in addition to the
timely payment of the Accrued Obligations. Employee shall have no duty to
mitigate damages and none of the payments provided in this Section VI-A shall
be reduced by any amounts earned or received by Employee from a third party
at any time.
B. Notwithstanding anything in this Agreement to the contrary, any
"parachute payments" to be made to or for Employee's benefit, whether pursuant
to this Agreement or otherwise, shall be modified to the extent necessary so
that the requirements of one of the two subparagraphs below are satisfied:
1. The aggregate "present value" of all "parachute payments" payable
to Employee or for Employee's benefit, whether pursuant to this Agreement
or otherwise, shall be less than three (3) times Employee's "base amount";
or
2. Each "parachute payment" payable to Employee or for Employee's
benefit, whether pursuant to this Agreement or otherwise, shall be in an
amount which does not exceed the "reasonable compensation" allocable to
such "parachute payment."
C. For purposes of this Section VI:
1. A "Change in Control" of the Company means any of the following:
(1) Approval by the shareholders of the Company of the dissolution or
liquidation of the Company;
(2) Approval by the shareholders of the Company of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more entities
that are not subsidiaries or other affiliates, as a result of which less than
60% of the outstanding voting securities of the surviving or resulting entity
immediately after the reorganization are, or will be, owned, directly or
indirectly, by shareholders or other affiliates of the Company immediately
before such reorganization (assuming for purposes of such determination that
there is no change in the record ownership of the Company's securities from the
record date for such approval until such reorganization but including in such
determination any securities of the other parties to such reorganization held by
affiliates of the Company);
(3) Approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets to a person or entity
which is not a subsidiary or other affiliate; or
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<PAGE>
(4) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")) becomes the
"beneficial owner") (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities entitled to
then vote generally in the election of directors of the Company. For purposes
of this Section VI-C-(4), "voting power" shall not include any voting power to
the extent such entity (or its members) held the securities giving such voting
power on the third business day after the effective time of the Company's first
registration of such class of securities under the Exchange Act.
2. "Good Reason" shall mean (a) an adverse and significant change in
Employee's position, duties, responsibilities, or status with the Company, (b) a
change in Employee's office location to a point more than 50 miles from
Employee's office immediately prior to a Change in Control, (c) the taking of
any action by the Company to eliminate benefit plans without providing
substitutes therefore, to reduce benefits thereunder or to substantially
diminish the aggregate value of incentive awards or other fringe benefits, (d)
any reduction in Employee's base salary, or (e) breach of this Agreement by the
Company.
3. The term "base amount" shall have the meaning ascribed to it
under Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code");
4. The term "parachute payment" shall have the meaning ascribed in
Section 280G(b)(2)(A) of the Code, without regard to Section 280G(b)(2)(A)(ii)
of the Code but with regard to Section 280G(b)(4)(A);
5. "Present value" shall be determined in accordance with Section
280G(d)(4) of the Code;
6. The term "reasonable compensation" shall have the meaning
ascribed to it under Section 280G(b)(4)(B) of the Code (for personal services
actually rendered before the date of the Change in Control of the Company); and
7. The portion of the "base amount" and the amount of "reasonable
compensation" allocable to any "parachute payment" shall be determined in
accordance with Section 280G(b)(3) of the Code and Section 280G(b)(4)(B) of the
Code, respectively.
D. In the event the amount of any of "parachute payments" which would be
payable to Employee or for Employee's benefit without regard to this Section
must be modified to comply with this Section VI, Employee shall direct which
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"parachute payments" are to be a waived or modified; provided, however, that
no change in timing of the payments shall be made without the consent of the
Company.
E. All determinations required by this Section VI, including without
limitation the determination of whether any benefit or payment would constitute
a parachute payment, the calculation of the value of any parachute and whether
any benefit or payment constitutes reasonable compensation, shall be made by an
independent accounting firm (other than the Company's outside auditing firm)
having nationally recognized expertise in such matters selected by the
Compensation Committee of the Board of Directors of the Company. Any such
determination by such accounting firm shall be binding on the Company and
Employee.
F. Payment of amounts pursuant to this Agreement shall not, unless
directed by Employee, be delayed pending determination of the status of a
payment as a "parachute payments" by the Internal Revenue Service, court or
similar body of competent jurisdiction.
VII. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement,
its enforcement or interpretation, or because of an alleged breach, default,
or misrepresentation in connection with any of its provisions, shall be
submitted to arbitration, to be held in Orange County, California in
accordance with the Voluntary Labor Arbitration Rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitration
may be entered in any court in the State of California, or in any other court
of competent jurisdiction. In the event either party institutes arbitration
under this Agreement arising prior to a Change in Control of the Company, the
party prevailing in any such litigation shall be entitled, in addition to all
other relief, the reasonable attorneys' fees relating to such arbitration,
and the nonprevailing party shall be responsible for all costs of the
arbitration, including but not limited to, the arbitration fees, court
reporter fees, etc. In the case of any arbitration or subsequent judicial
proceedings arising after a Change in Control of the Company, Employee shall
be awarded his costs, including attorneys' fees.
VIII. NONCOMPETITION.
A. Employee agrees that, during the term of this Agreement, and for a
period of six months thereafter, he will not, directly or indirectly, without
the prior written consent of the Board of Directors of the Company, provide
consultative service with or without pay, own, manage, operate, join, control,
participate in, or be connected as a stockholder,
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partner, or otherwise with, any business, individual, partner, firm,
corporation, or other entity which is then in the business of producing metal
fasteners (or related products) for the aerospace industry anywhere
(including both in the United States and abroad). However, this Section
VIII-A will not apply if Employee's only relationship to such business is by
ownership of less than 4% of the outstanding voting securities of a
publicly-traded company.
B. It is expressly agreed that the Company will or would suffer
irreparable injury if Employee were to compete with the business of the Company
or any subsidiary or affiliate of the Company in violation of this Agreement and
that the Company would by reason of such competition be entitled to injunctive
relief in a court of appropriate jurisdiction. Employee consents and stipulates
to the entry of such injunctive relief in such a court prohibiting him from
competing with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement.
IX. ANTISOLICITATION.
Employee promises and agrees that during the term of this Agreement he will
not influence or attempt to influence customers of the Company or any of its
present or future subsidiaries or affiliates, either directly or indirectly, to
divert their business to any individual, partnership, firm, corporation or other
entity then in competition with the business of the Company, or any subsidiary
or affiliate of the Company.
X. JOINING FORMER COMPANY EMPLOYEES.
Employee promises and agrees that for six months following his termination
of employment other than pursuant to Section V-C or VI above or Disability above
or expiration of this Agreement, he will not enter business or work with any
person who was employed with the Company, and who earned annually $80,000 or
more as a Company employee during the last six months of his or her own
employment, in any business, partnership, firm, corporation or other entity then
in competition with the business of the Company or any subsidiary or affiliate
of the Company.
XI. SOLICITING EMPLOYEES.
Employee promises and agrees that he will not, for a period of one year
following termination of his employment or the expiration of this Agreement,
directly or indirectly solicit any of the Company employees who earned annually
$80,000 or more as a Company employee during the last six months of his or her
own employment to work for any business, individual, partnership, firm,
corporation, or other entity
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then in competition with the business of the Company or any subsidiary or
affiliate of the Company.
XII. CONFIDENTIAL INFORMATION.
A. Employee shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by Employee during his employment by the Company
or any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by Employee or his representatives in violation of
this Agreement). After termination of Employee's employment with the Company,
he shall not, without the prior written consent of the Company, or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
B. Employee agrees that all lists, materials, books, files, reports,
correspondence, records, and other documents ("Company material") used,
prepared, or made available to Employee, shall be and shall remain the property
of the Company. Upon the termination of employment or the expiration of this
Agreement, all Company materials shall be returned immediately to the Company,
and Employee shall not make or retain any copies thereof.
XIII. SUCCESSORS.
A. This Agreement is personal to Employee and shall not, without the
prior written consent of the Company, be assignable by Employee.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
XIV. WAIVER.
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
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XV. MODIFICATION.
This Agreement may not be amended or modified other than by a written
agreement executed by the Employee and the Company.
XVI. SAVINGS CLAUSE.
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
XVII. COMPLETE AGREEMENT.
This instrument constitutes and contains the entire agreement and
understanding concerning Employee's employment and other subject matters
addressed herein between the parties, and supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matter hereof. This is an integrated agreement.
XVIII. GOVERNING LAW.
This Agreement shall be deemed to have been executed and delivered
within the State of California, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed
by, by the laws of the State of California without regard to principles of
conflict of laws.
XIX. CONSTRUCTION.
The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XX. COMMUNICATIONS.
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered
in person, by telecopy, telex or equivalent form of written telecommunication
or if sent by registered or certified mail, return receipt requested,
postage prepaid, as follows:
To Company: Kaynar Technologies Inc.
800 South State College Boulevard
Fullerton, California 92831
Attention:
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With copy to: O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: C. James Levin, Esq.
To Employee:
Either party may change the address at which notice shall be given by written
notice given in the above manner. All notices required or permitted hereunder
shall be deemed duly given and received on the date of delivery, if delivered in
person or by telex, telecopy or other written telecommunication on a regular
business day and within normal business hours or on the fifth day next
succeeding the date of mailing, if sent by certified or registered mail.
XXI. EXECUTION.
This Agreement is being executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Photographic copies of such signed counterparts
may be used in lieu of the originals for any purpose.
XXII. LEGAL COUNSEL.
The Employee and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to
consult with legal counsel of their choice.
XXIII. SURVIVAL.
The provisions of this Agreement shall survive the term of this Agreement
to the extent necessary to accommodate full performance of all such terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
- ------------------------------ -------------------------------
KAYNAR TECHNOLOGIES INC.
By
--------------------------
Its
--------------------------
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and between
KAYNAR TECHNOLOGIES INC., a Delaware corporation, (the "Company") and
_______________ ("Employee"), as of the ____ day of February 1997.
I. EMPLOYMENT.
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth.
II. TERMS.
This Agreement shall be effective from the date hereof to December 31,
1997; provided, however, that on June 30, 1997 six months before expiration and
every six months thereafter ("Renewal Date"), this Agreement shall be extended
for one additional year unless, at least 30 days prior to the Renewal Date
(which shall be either June 30 or December 31), the Company shall have delivered
to Employee or Employee shall have delivered to the Company written notice that
the Agreement shall not be so extended.
III. DUTIES.
A. Employee shall serve during the course of his employment as
______________________, of the Company, and shall have such other duties and
responsibilities as the Board of Directors of the Company shall determine from
time to time.
B. Employee agrees to devote substantially all of his time, energy and
ability to the business of the Company. Nothing herein shall prevent Employee,
upon approval of the Board of Directors of the Company, from serving as a
director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any present
or future affiliate of the Company.
IV. COMPENSATION.
A. The Company will pay to Employee a base salary at the rate of
$__________ per year. Such salary shall be earned monthly and shall be payable
in periodic installments no less frequently than monthly in accordance with the
Company's customary practices. Amounts payable shall be reduced by standard
withholding and other authorized deductions. The Company will review Employee's
salary at least annually. The Company may in its discretion increase Employee's
salary but it may not reduce it during the term of this Agreement.
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B. ANNUAL BONUS, INCENTIVE, SAVINGS AND RETIREMENT PLANS. Employee shall
be entitled to participate in all annual bonus, incentive, stock incentive,
savings and retirement plans, defined contribution plans, practices, policies
and programs applicable generally to other executives of the Company.
C. WELFARE BENEFIT PLANS. Employee and/or his family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other executives of the Company.
D. EXPENSES. Employee shall be entitled to receive prompt reimbursement
for all reasonable employment expenses incurred by him in accordance with the
policies, practices and procedures as in effect generally with respect to other
executives of the Company.
E. FRINGE BENEFITS. Employee shall be entitled to fringe benefits in
accordance with the plans, practices, programs and policies as in effect
generally with respect to other executives of the Company.
F. VACATION. Employee shall be entitled to paid vacation time in
accordance with the plans, policies, programs and practices as in effect with
respect to other employees of the Company.
G. PLAN AMENDMENTS. The Company reserves the right to modify, suspend or
discontinue any and all of its employee plans, practices, policies and programs
at any time without recourse by Employee so long as such action is taken
generally with respect to other similarly situated executives and does not
single out Employee.
V. TERMINATION.
A. DEATH OR DISABILITY. Employee's employment shall terminate
automatically upon Employee's death. If the Company determines in good faith
that a Disability of Employee has occurred (as Disability is defined below), it
may give to Employee written notice in accordance with Section XX of its
intention to terminate Employee's employment. In such event, Employee's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by Employee, provided that, within the 30 days after such
receipt, Employee shall not have returned to full-time performance of his
duties. For purposes of this Agreement,
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"Disability" shall mean the absence of Employee from his duties with the Company
on a full-time basis for a period of two consecutive months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to Employee or his legal representative (such agreement as to acceptability not
to be withheld unreasonably). "Incapacity" as used herein shall be limited only
to such Disability which substantially prevents the Company from availing itself
of the services of Employee or substantially impairs the Employee's ability to
perform services to the standard reasonably expected by the Company for
Employee's office.
B. CAUSE, ETC.. Following a Change in Control, as defined in Section VI
below, during the term of this Agreement remaining after such Change in Control,
the parties agree that the Company may terminate Employee's employment only for
Cause, as "Cause" is defined below. Prior to the occurrence of a Change in
Control (and so long as such termination is not made in connection therewith)
the Company may terminate Employee's employment, at any time, with or without
Cause. The Company also may terminate such employment, at any time, for
Employee's breach of the provisions of Sections VIII (Noncompetition), IX
(Antisolicitation) or XII (Confidential Information) or as set forth in
paragraph A above. For purposes of this Agreement, "Cause" shall mean that the
Company, acting in good faith based upon the information then known to the
Company, determines that Employee has: (1) failed to perform in a material
respect his obligations under this Agreement without proper reason, (2) been
convicted of a felony, or (3) committed a material act of fraud, dishonesty or
gross misconduct which is materially injurious to the Company.
C. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
1. DEATH OR DISABILITY. If Employee's employment is terminated by
reason of Employee's Death or Disability, this Agreement shall not be
subject to any further extension pursuant to Section II hereof.
2. CAUSE, ETC. If Employee's employment is terminated by the
Company pursuant to Section V-B, this Agreement shall terminate without
further obligations to Employee other than for (a) payment of the sum of
Employee's annual base salary through the date of termination and any
accrued vacation pay to the extent not theretofore paid, which shall be
paid to Employee or his estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the date of termination; (b) payment of any
compensation previously deferred by Employee (together with any accrued
interest or earnings
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thereon), which shall be paid to Employee or his estate or beneficiary
pursuant to terms of the plan or agreement under which such compensation
was deferred; and (c) payment to Employee or his estate or beneficiary, as
applicable, any amounts due pursuant to the terms of any applicable welfare
benefit plans. The payments described in clauses (a) and (b) shall
hereinafter be referred to as the "Accrued Obligations." If it is
subsequently determined that the Company did not have the right to
terminate Employee under Section V-B, then the Company's decision to
terminate shall be deemed to have been made under Section V-C-3 and the
amounts payable thereunder shall be the only amounts Employee may receive
for his termination.
3. OTHER. If the Company breaches this Agreement by terminating
Employee's employment other than pursuant to Sections V-A or V-B, the
Company (a) shall immediately pay to Employee a lump sum equal to
Employee's base salary for one year at the rate in effect immediately prior
to Employee's termination of employment, less standard withholdings and
other authorized deductions, and (b) shall timely pay to Employee the
Accrued Obligations. Employee shall have no duty to mitigate damages and
none of the payments provided in this Section V-C-3 shall be reduced by any
amounts earned or received by Employee from a third party at any time.
4. EXCLUSIVE REMEDY. Employee agrees that the payments contemplated
by this Agreement shall constitute the exclusive and sole remedy for any
termination of his employment and Employee covenants not to assert or
pursue any other remedies, at law or in equity, with respect to any
termination of employment.
VI. CHANGE IN CONTROL.
A. Notwithstanding anything to the contrary in this Agreement, if a
Change in Control (as defined below) of the Company occurs during the term of
this Agreement, and if within two years following such Change in Control either
the Company terminates Employee's employment, or if employee terminates his
employment for Good Reason (as defined below), the Company shall pay to Employee
by cashier's check immediately upon Employee's termination of employment with
the Company an amount equal to the sum of (1) the amount of the highest annual
base salary paid to Employee during the three most recent calendar years ending
prior to the year in which the Change in Control occurs and (2) the amount of
the highest bonus (or bonuses) paid to Employee for any calendar year ending
prior to the year in which the Change in Control occurs. This payment shall be
in lieu of the lump sum payment otherwise payable under Section V-C-3(a), but
shall be in
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addition to the timely payment of the Accrued Obligations. Employee shall have
no duty to mitigate damages and none of the payments provided in this Section
VI-A shall be reduced by any amounts earned or received by Employee from a third
party at any time.
B. Notwithstanding anything in this Agreement to the contrary, any
"parachute payments" to be made to or for Employee's benefit, whether pursuant
to this Agreement or otherwise, shall be modified to the extent necessary so
that the requirements of one of the two subparagraphs below are satisfied:
1. The aggregate "present value" of all "parachute payments" payable
to Employee or for Employee's benefit, whether pursuant to this Agreement
or otherwise, shall be less than three (3) times Employee's "base amount";
or
2. Each "parachute payment" payable to Employee or for Employee's
benefit, whether pursuant to this Agreement or otherwise, shall be in an
amount which does not exceed the "reasonable compensation" allocable to
such "parachute payment."
C. For purposes of this Section VI:
1. A "Change in Control" of the Company means any of the following:
(1) Approval by the shareholders of the Company of the dissolution or
liquidation of the Company;
(2) Approval by the shareholders of the Company of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more entities
that are not subsidiaries or other affiliates, as a result of which less than
60% of the outstanding voting securities of the surviving or resulting entity
immediately after the reorganization are, or will be, owned, directly or
indirectly, by shareholders or other affiliates of the Company immediately
before such reorganization (assuming for purposes of such determination that
there is no change in the record ownership of the Company's securities from the
record date for such approval until such reorganization but including in such
determination any securities of the other parties to such reorganization held by
affiliates of the Company);
(3) Approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets to a person or entity
which is not a subsidiary or other affiliate; or
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(4) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act")) becomes the
"beneficial owner") (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than 20% of the
combined voting power of the Company's then outstanding securities entitled to
then vote generally in the election of directors of the Company. For purposes
of this Section VI-C-(4), "voting power" shall not include any voting power to
the extent such entity (or its members) held the securities giving such voting
power on the third business day after the effective time of the Company's first
registration of such class of securities under the Exchange Act.
2. "Good Reason" shall mean (a) an adverse and significant change in
Employee's position, duties, responsibilities, or status with the Company, (b) a
change in Employee's office location to a point more than 50 miles from
Employee's office immediately prior to a Change in Control, (c) the taking of
any action by the Company to eliminate benefit plans without providing
substitutes therefore, to reduce benefits thereunder or to substantially
diminish the aggregate value of incentive awards or other fringe benefits, (d)
any reduction in Employee's base salary, or (e) breach of this Agreement by the
Company.
3. The term "base amount" shall have the meaning ascribed to it
under Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code");
4. The term "parachute payment" shall have the meaning ascribed in
Section 280G(b)(2)(A) of the Code, without regard to Section 280G(b)(2)(A)(ii)
of the Code but with regard to Section 280G(b)(4)(A);
5. "Present value" shall be determined in accordance with Section
280G(d)(4) of the Code;
6. The term "reasonable compensation" shall have the meaning
ascribed to it under Section 280G(b)(4)(B) of the Code (for personal services
actually rendered before the date of the Change in Control of the Company); and
7. The portion of the "base amount" and the amount of "reasonable
compensation" allocable to any "parachute payment" shall be determined in
accordance with Section 280G(b)(3) of the Code and Section 280G(b)(4)(B) of the
Code, respectively.
D. In the event the amount of any of "parachute payments" which would be
payable to Employee or for Employee's benefit without regard to this Section
must be modified to comply with this Section VI, Employee shall direct which
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<PAGE>
"parachute payments" are to be a waived or modified; provided, however, that no
change in timing of the payments shall be made without the consent of the
Company.
E. All determinations required by this Section VI, including without
limitation the determination of whether any benefit or payment would constitute
a parachute payment, the calculation of the value of any parachute and whether
any benefit or payment constitutes reasonable compensation, shall be made by an
independent accounting firm (other than the Company's outside auditing firm)
having nationally recognized expertise in such matters selected by the
Compensation Committee of the Board of Directors of the Company. Any such
determination by such accounting firm shall be binding on the Company and
Employee.
F. Payment of amounts pursuant to this Agreement shall not, unless
directed by Employee, be delayed pending determination of the status of a
payment as a "parachute payments" by the Internal Revenue Service, court or
similar body of competent jurisdiction.
VII. ARBITRATION.
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Orange County, California in accordance with the
Voluntary Labor Arbitration Rules of the American Arbitration Association.
Judgment upon the award rendered by the arbitration may be entered in any court
in the State of California, or in any other court of competent jurisdiction. In
the event either party institutes arbitration under this Agreement arising prior
to a Change in Control of the Company, the party prevailing in any such
litigation shall be entitled, in addition to all other relief, the reasonable
attorneys' fees relating to such arbitration, and the nonprevailing party shall
be responsible for all costs of the arbitration, including but not limited to,
the arbitration fees, court reporter fees, etc. In the case of any arbitration
or subsequent judicial proceedings arising after a Change in Control of the
Company, Employee shall be awarded his costs, including attorneys' fees.
VIII. NONCOMPETITION.
A. Employee agrees that, during the term of this Agreement, and for a
period of six months thereafter, he will not, directly or indirectly, without
the prior written consent of the Board of Directors of the Company, provide
consultative service with or without pay, own, manage, operate, join, control,
participate in, or be connected as a stockholder,
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partner, or otherwise with, any business, individual, partner, firm,
corporation, or other entity which is then in the business of producing metal
fasteners (or related products) for the aerospace industry anywhere (including
both in the United States and abroad). However, this Section VIII-A will not
apply if Employee's only relationship to such business is by ownership of less
than 4% of the outstanding voting securities of a publicly-traded company.
B. It is expressly agreed that the Company will or would suffer
irreparable injury if Employee were to compete with the business of the Company
or any subsidiary or affiliate of the Company in violation of this Agreement and
that the Company would by reason of such competition be entitled to injunctive
relief in a court of appropriate jurisdiction. Employee consents and stipulates
to the entry of such injunctive relief in such a court prohibiting him from
competing with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement.
IX. ANTISOLICITATION.
Employee promises and agrees that during the term of this Agreement he will
not influence or attempt to influence customers of the Company or any of its
present or future subsidiaries or affiliates, either directly or indirectly, to
divert their business to any individual, partnership, firm, corporation or other
entity then in competition with the business of the Company, or any subsidiary
or affiliate of the Company.
X. JOINING FORMER COMPANY EMPLOYEES.
Employee promises and agrees that for six months following his termination
of employment other than pursuant to Section V-C or VI above or Disability above
or expiration of this Agreement, he will not enter business or work with any
person who was employed with the Company, and who earned annually $80,000 or
more as a Company employee during the last six months of his or her own
employment, in any business, partnership, firm, corporation or other entity then
in competition with the business of the Company or any subsidiary or affiliate
of the Company.
XI. SOLICITING EMPLOYEES.
Employee promises and agrees that he will not, for a period of one year
following termination of his employment or the expiration of this Agreement,
directly or indirectly solicit any of the Company employees who earned annually
$80,000 or more as a Company employee during the last six months of his or her
own employment to work for any business, individual, partnership, firm,
corporation, or other entity
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then in competition with the business of the Company or any subsidiary or
affiliate of the Company.
XII. CONFIDENTIAL INFORMATION.
A. Employee shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by Employee during his employment by the Company
or any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by Employee or his representatives in violation of
this Agreement). After termination of Employee's employment with the Company,
he shall not, without the prior written consent of the Company, or as may
otherwise be required by law or legal process, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
B. Employee agrees that all lists, materials, books, files, reports,
correspondence, records, and other documents ("Company material") used,
prepared, or made available to Employee, shall be and shall remain the property
of the Company. Upon the termination of employment or the expiration of this
Agreement, all Company materials shall be returned immediately to the Company,
and Employee shall not make or retain any copies thereof.
XIII. SUCCESSORS.
A. This Agreement is personal to Employee and shall not, without the
prior written consent of the Company, be assignable by Employee.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
XIV. WAIVER.
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
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XV. MODIFICATION.
This Agreement may not be amended or modified other than by a written
agreement executed by the Employee and the Company.
XVI. SAVINGS CLAUSE.
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
XVII. COMPLETE AGREEMENT.
This instrument constitutes and contains the entire agreement and
understanding concerning Employee's employment and other subject matters
addressed herein between the parties, and supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether written or oral,
concerning the subject matter hereof. This is an integrated agreement.
XVIII. GOVERNING LAW.
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
XIX. CONSTRUCTION.
The captions of this Agreement are not part of the provisions hereof and
shall have no force or effect.
XX. COMMUNICATIONS.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered in person,
by telecopy, telex or equivalent form of written telecommunication or if sent by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
To Company: Kaynar Technologies Inc.
800 South State College Boulevard
Fullerton, California 92831
Attention: David A. Werner
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With copy to: O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, California 90071
Attention: C. James Levin, Esq.
To Employee:
Either party may change the address at which notice shall be given by written
notice given in the above manner. All notices required or permitted hereunder
shall be deemed duly given and received on the date of delivery, if delivered in
person or by telex, telecopy or other written telecommunication on a regular
business day and within normal business hours or on the fifth day next
succeeding the date of mailing, if sent by certified or registered mail.
XXI. EXECUTION.
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
XXII. LEGAL COUNSEL.
The Employee and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice.
XXIII. SURVIVAL.
The provisions of this Agreement shall survive the term of this Agreement
to the extent necessary to accommodate full performance of all such terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
- --------------------------- -------------------------
KAYNAR TECHNOLOGIES INC.
By
------------------------
Its
-----------------------
11
<PAGE>
[LETTERHEAD]
1996
Mr. Ken Jones,
29C Stanhope Grove,
CAMBERWELL VIC 3124
Dear Ken,
RE: LETTER OF APPOINTMENT TO THE POSITION OF SENIOR RELATIONSHIP MANAGER
The purpose of this letter is to confirm the offer to you of the position of
GROUP CHIEF EXECUTIVE and to set out the terms of employment for Recoil Pty ACN
073 750 428 (the Company) as an affiliate of Kaynar Technologies Inc., and which
is a member company of the KTI Group.
1. DATE OF COMMENCEMENT
Your employment with the Company, for the purposes of accrual of long
service leave and annual leave commenced 24 August, 1994. Your position as
Group Chief Executive with the Company commenced with effect from 11
August, 1996 (the Commencement Date)
2. JOB TITLE AND POSITION RESPONSIBILITIES
You are being appointed to perform the position of Group Chief Executive.
You are required to exercise the powers and to perform the duties from time
to time assigned to you by the Board of Recoil Pty.
3. REMUNERATION
Your Total Remuneration Package is comprised of base salary, superannuation
contributions and fringe benefits.
BASE SALARY
The method of payment of Base Salary is described in the Standard Terms of
Employment annexed to this letter as Annexure "A". Your Base Salary is
Aud$184000 per annum effective from 11th August, 1996.
SUPERANNUATION CONTRIBUTIONS
The Company will contribute 10% of your Base Salary to a complying
superannuation fund nominated by you.
<PAGE>
FRINGE BENEFITS
Other components of the package shall be agreed between the Company and
yourself so that they can be provided to you in the most tax efficient
manner within the requirements of the applicable law for both yourself and
the Company.
The Total Remuneration Package shall include the cost to the Company of any
fringe benefits tax in regard to the provision of any components including
but not limited to the following provisions:
(A) MOTOR VEHICLE
A motor vehicle being a motor vehicle at least equivalent to the
existing Holden Statesman. The Company agrees to replace the motor
vehicle every 3 years. The Company agrees to pay all lease payments,
registration, running, service, maintenance and insurance costs.
(B) BUSINESS TRAVEL AND ENTERTAINMENT EXPENSES
The Company will reimburse you for all reasonable travelling,
entertainment, accommodation and general expenses incurred by you in
connection with performing your functions as Group Chief Executive.
(C) HOME TELEPHONE & FAX
The Company will reimburse you for all home telephone and fax
expenses.
4. SALARY REVIEW
Your Base Salary of Aud$184000 per annum referred to in Clause 3 shall be
reviewed each year commencing 1 year from the acquisition date of the
Recoil Pty Ltd. business by Kaynar Technologies Inc. (11 August, 1996).
5. BONUS PAYMENTS
In addition to the Total Remuneration Package referred to in Clause 4 of
this letter you may be entitled to receive bonus payments.
You will be entitled to a bonus equal to 1% of your base salary for every
1% increase in Net Profit Before Depreciation, Interest and Tax (NPBDIT)
when comparing the prior year as at 30 June to the current year as at 30
June. The calculation will include an adjustment for acquisition
accounting and will be payable on or before 1 August in each year.
It should be noted that the basis of your entitlement to a bonus payment
may be varied by agreement between you and the Company at any time.
<PAGE>
6. NOTICE OF TERMINATION
You may terminate your employment by providing to the Company four months
notice in writing of your intention to terminate. The Company may
terminate your employment at any time by giving you four months written
notice of termination.
In the case of notice of termination of employment being given by the
Company, the Company may satisfy its obligations by payment in lieu of
notice. In the event that payment in lieu of notice is made then the
payment shall be based on the Total Remuneration Package set out in Clause
4 of this letter (as increased from time to time).
Despite the preceding paragraphs, the Company may terminate your employment
at any time during the Term without notice in circumstances where you have
engaged in misconduct which seriously prejudices the Company's business or
such that it would be unreasonable for the Company to continue your
employment during the period of notice.
7. SPECIAL PAYMENT
In the event that your employment is terminated by you or the Company for
any reason within the first 3 years from the Commencement Date, you will be
entitled in addition to any payments made under clause 6, to a special
payment equivalent to six months of your Total Remuneration Package.
8. STOCK OPTION PLAN
The Company acknowledges and agrees to continue negotiations to establish a
stock option plan. Once these details are finalised it is intended to
include you in this plan.
9. REFERENCE TO ANNEXURES
There is an annex to this letter of appointment being the following:
ANNEXURE A: The standard terms of employment which apply to your
employment with the Company.
Please note that by agreeing to accept employment with the Company on the
terms set out in this letter you agree that the terms which are contained
in the annexure also form part of the terms of your employment.
10. TAX FILE NUMBER
It is a requirement of the Australian Taxation Office that unless the
Company receives your Tax File Number it will be required to deduct tax
from your salary or wages at the maximum marginal rate. Accordingly, you
are requested to supply your Tax File Number on your date of commencement
of employment.
<PAGE>
ACCEPTANCE
Please sign and return the attached copy of this letter acknowledging your
agreement to the terms of your employment.
By signing this letter you acknowledge that the letter and the Annexure "A"
constitutes the entire agreement between the Company and yourself concerning
your employment and supersedes all prior arrangements, understandings and
negotiations concerning same.
Yours faithfully, Accepted
/s/ Jordan Law /s/ Ken Jones
________________________ _________________________
JORDAN LAW KEN JONES
CHAIRMAN
<PAGE>
STANDARD TERMS OF EMPLOYMENT
(ANNEXURE "A")
1. METHOD OF PAYMENT OF BASE SALARY
After deduction of pay as you earn (PAYE) income tax instalments payment of
base salary will be made on or before the 15th day of each month for the
current calender month. Payments will be made directly to the bank account
of your choice. The Company reserves the right to alter the manner in
which your base salary is paid to suit its administrate and accounting
practices.
Unless you are on unpaid leave your base salary whilst on leave will be
paid in this manner.
2. SICK LEAVE
In the event that you are absent from work as a result of illness you will
be entitled to sick leave on full pay for at least one month per annum
which is cummulative or such greater period as the Company may determine.
3. ANNUAL LEAVE
Your minumum annual leave entitlements are provided in accordance with the
legislation applicable in Victoria which is 20 days paid leave after 12
months completed service. Leave loading is payable at 17 1/2% Annual leave
is accumulated if it is not taken, however, it is the Company's preference
that you take your annual leave within the in the year after it is earned.
4. LONG SERVICE LEAVE
Long Service leave is provided in accordance with the applicable Victorian
legislation.
5. JURY DUTY
The Company will provide leave with pay to employees who are required to
serve on jury duty and any compensation received from the Court should be
refunded to the Company.
6. ANTI-DISCRIMINATION
The Company is a non-discriminatory and equal opportunity employer. All
employees are required not to engage in any form of unlawful discrimination
and shall treat all fellow employees in a respectful manner.
7. NON SMOKING POLICY
Smoking is not permitted in the offices or factory of the Company.
<PAGE>
8. WORKERS' COMPENSATION
In order to protect the rights of employees notice of any injury incurred
during working hours or whilst travelling to or from work shall be given to
the Company Secretary within a reasonable time.
<PAGE>
INDEMNIFICATION AGREEMENT
KAYNAR TECHNOLOGIES INC.
This Indemnification Agreement ("Agreement") is made as of February ,
1997 by and between KAYNAR TECHNOLOGIES INC., a Delaware corporation (the
"Company"), and ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the difficulty of obtaining
directors' and officers' liability insurance that fully and adequately covers
directors for their acts and omissions on behalf of the Company and its
subsidiaries;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation, subjecting directors to expensive litigation
risks;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances and Indemnitee and other directors of
the Company may not be willing to continue to serve as directors without
additional protection; and
WHEREAS, the Company desires to attract and retain highly qualified
individuals, such as Indemnitee, to serve as directors of the Company and to
indemnify its directors so as to provide them with the maximum protection
permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD-PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
in the event Indemnitee was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company, whose
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding unless the Company
shall
<PAGE>
establish, in accordance with the procedures described in Section 3(c), that
Indemnitee did not act in good faith or in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company, or,
with respect to any criminal action or proceeding, had reasonable cause to
believe Indemnitee's conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith or in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests
of the Company, or, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that Indemnitee is or was a director, officer, employee or agent of the Company,
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement actually and reasonably incurred by Indemnitee in connection with
the defense or settlement of such action or suit if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in or not opposed to
the best interests of the Company and except that no indemnification shall be
made in respect of any claim, issue or matter as to which Indemnitee shall have
been adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Subsections (a) and (b) of this Section 1 or in
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
(d) GOOD FAITH DEFINED. The provisions of this Section 1(d) shall
not be deemed to be exclusive or to limit in any way the circumstances in which
Indemnitee may be deemed to have met the applicable standard of conduct set
forth in
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<PAGE>
Section 1. Indemnitee shall, in the performance of Indemnitee's duties, be
fully protected in relying in good faith upon the records of the Company and
upon such information, opinions, reports or statements presented to the
Company by any of the Company's officers or employees, or committees of the
Board of Directors, or by any other person as to matters Indemnitee
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of
the Company.
2. AGREEMENT TO SERVE. In consideration of the protection afforded by
this Agreement, Indemnitee agrees to serve as a director in such capacity at the
will of the Company (or under separate agreement, if such agreement exists) so
long as Indemnitee is duly appointed or elected and qualified in accordance with
the applicable provisions of the By-laws of the Company or any subsidiary of the
Company or until such time as Indemnitee tenders a resignation in writing.
Nothing contained in this Agreement is intended to create in Indemnitee any
right to continued employment or directorship, whether during or after such
fiscal year.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. Notwithstanding any other provision of
this Agreement (including the exceptions in Section 9), the Company shall
advance all expenses incurred by Indemnitee in connection with the
investigation, defense, settlement or appeal of any civil or criminal action,
suit or proceeding referenced in Section 1(a) or (b). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company. The advances for expenses shall be paid by the Company to
Indemnitee within twenty (20) days following delivery of a written request by
Indemnitee.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to any rights under this Agreement, give the Company written
notice as soon as practicable of any claim for which indemnification will or
could be sought. All notices, requests, demands, and other communications
relating to indemnification or the advancement of expenses shall be in writing
and shall be deemed duly given (i) if delivered by hand and receipted for by the
Company, on the date of such receipt, or (ii) if mailed by domestic certified or
registered mail with postage prepaid on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the signature
page of this Agreement or as subsequently modified by written notice. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.
3
<PAGE>
(c) PROCEDURE. Any indemnification and advances provided for in
Sections 1 and 3 shall be made no later than forty-five (45) days after
receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or By-laws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written
request for payment thereof has first been received by the Company,
Indemnitee may at any time thereafter bring an action against the Company to
recover the unpaid amount of the claim and, subject to Section 13 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses
(including attorneys' fees) of bringing such action. It shall be a defense
to any such action (other than an action brought to enforce a claim for
expenses incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met the standards
of conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company and Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 3(a) unless and until
such defense may be finally adjudicated by judicial determination from which
no further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for a court of competent
jurisdiction to decide and neither the failure of the Company (including its
Board of Directors or its independent legal counsel) to make a determination
that indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law nor an actual determination by the Company (including its Board of
Directors or its independent legal counsel) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee
has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has directors' and
officers' liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable actions to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable in accordance with the terms of such
policies.
(e) RELATIONSHIP TO OTHER SOURCES. Indemnitee shall not be required
to exercise any rights against any other parties (e.g., under any insurance
policy purchased by the Company, Indemnitee or any other person or entity)
before Indemnitee enforces this Agreement. To the extent that the Company
actually indemnifies Indemnitee or advances expenses, Indemnitee agrees to
4
<PAGE>
subrogate such rights against third parties to the Company to recover amounts
with respect to which the Company's payments were made. Indemnitee shall
assist the Company in enforcing those rights if the Company pays Indemnitee's
reasonable costs and expenses of doing so.
(f) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, whose approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice
of its election so to do. After delivery of such notice, approval of such
counsel by Indemnitee, and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees or
expenses of other counsel subsequently incurred by Indemnitee with respect to
the same proceeding, provided that (i) Indemnitee shall have the right to employ
his counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee has reasonably concluded that there is a conflict of
interest between the Company and Indemnitee in the conduct of any such defense
or (C) the Company has not, in fact, employed counsel to assume the defense of
such proceeding, the reasonable fees and expenses of Indemnitee's counsel shall
be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement
(including the exceptions in Section 9), the Company hereby agrees to indemnify
Indemnitee to the fullest extent permitted by law, notwithstanding that separate
indemnification may or may not be independently authorized by other provisions
of this Agreement, the Company's Certificate of Incorporation, its By-laws, or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute, or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors, such changes shall
be, IPSO FACTO, within the purview of Indemnitee's rights and Company's
obligations under this Agreement. In the event of any change in any applicable
law, statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its board of directors, such changes, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement,
shall have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its By-laws, any other
agreement, any vote of
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<PAGE>
stockholders or disinterested directors of the Company, or by statute, or
otherwise, both as to action in Indemnitee's official capacity and as to
action in another capacity while holding such office. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity even though he
may have ceased to serve in such capacity at the time of any action, suit or
other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not for the total amount thereof, the
Company shall indemnify Indemnitee for the portion of such expenses, judgments,
fines penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors under this
Agreement or otherwise. Indemnitee understands and acknowledges that the
Company may be required to submit the question of indemnification in certain
circumstances for judicial determination of the Company's ability to indemnify
Indemnitee.
7. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from
time to time, make a good faith determination whether it is practicable for the
Company to obtain and maintain a policy or policies of insurance providing the
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance against the protection afforded by such coverage. In all policies of
directors' and officers' liability insurance obtained by the Company, Indemnitee
shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors. Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain such insurance if the Company determines in
good faith that such insurance is not reasonably available, the premium costs
for such insurance are disproportionate to the amount of coverage provided, the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or Indemnitee is covered by similar insurance maintained
by a parent or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or
6
<PAGE>
fail to do any act in violation of applicable law. The Company's inability,
pursuant to court order, to perform its obligations under this Agreement
shall not constitute a breach of this Agreement. The provisions of this
Agreement shall be severable as provided in this Section 8. If this
Agreement or any portion hereof shall be invalidated on any ground by any
court of competent jurisdiction, the Company shall nevertheless indemnify
Indemnitee to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated and the balance of this
Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
directors' liability insurance maintained by the Company.
(d) CLAIMS UNDER SECTION 16(b). To indemnify or advance expenses to
Indemnitee for expenses or the payment of profits arising from the purchase and
sale by Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any
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<PAGE>
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agent, so that if
Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes or penalties assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action was not made in good faith or was frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material
8
<PAGE>
defenses to such action was not made in good faith or was frivolous.
14. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
within the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
KAYNAR TECHNOLOGIES INC.
By:
----------------------------------
Name:
Title:
800 S. State College Boulevard
Fullerton, California 92831
AGREED TO AND ACCEPTED:
INDEMNITEE:
- ---------------------------------------
(Signature)
- ---------------------------------------
(Print Name)
- ---------------------------------------
- ---------------------------------------
(Address)
9
